Welcome News for Obama: Optimism on Main Street

More small businesses turn the corner, even as big-business leaders grow more sour.

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North Main Street in Greeneville, Tennessee
North Main Street in Greeneville, Tennessee

Small businesses have struggled more than big ones as the so-called recovery plods along. But there are finally a few signs that small-business owners are growing more optimistic—even as executives at big firms turn a bit more sour.

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A recent survey of 134 small- and medium-sized firms by Sage, a software supplier, found that 33 percent of firms plan to hire over the next six months, while just 4 percent plan to downsize. Perhaps more importantly, 49 percent expect business to pick up, while only 14 percent expect it to slacken. New orders are the principal thing that will lead to increased production and more hiring.

Those findings mirror other signs of a small-biz rebound. The National Federation of Independent Business's optimism index ticked upward in the latest reading, after declining over the summer. As in the Sage survey, more employers say they plan to boost hiring and spending than say they plan to cut.

The attitude of small businesses is an important barometer in this year's political campaigns, because small firms are spread all throughout the economy, not just in big urban centers or corporate hubs. Firms with fewer than 500 employees also account for the vast majority of jobs in the U.S. economy, so the prospects for smaller firms directly affects hiring and unemployment.

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Business owners tend to favor Republican presidential nominee Mitt Romney over President Obama, because of Romney's business background and Obama's penchant for invoking government solutions. The NFIB was even one of the lead plaintiffs in the lawsuit against Obama's healthcare reform legislation, and it has argued vociferously against any new regulations that intensify the red tape business owners face.

Obama didn't help his case with business owners when he famously said in July, "If you've got a business—you didn't build that." The remark seemed to take credit away from entrepreneurs who put blood and sweat into building their own firms, a flub the Romney campaign has exploited ceaselessly.

But small-business owners may not reject Obama by the lopsided margins conventional wisdom suggests. A recent survey by George Washington University and Thumbtack, an online guide to local services, found that 39 percent of small-biz owners felt Obama was more supportive, while just 31 percent felt that way about Romney. That survey was limited to people running firms with six employees or fewer, and it was open to anybody who saw it on Thumbtack's website and wanted to take it. So it wasn't truly random. Still, the results may indicate that Obama enjoys decent support among Main Street businesses.

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He could use it, because executives at big firms have been turning on Obama, and growing skeptical about the economy, too. An August analysis of corporate political donations by Bloomberg found that a surprising number of employees at several big companies have switched their donations since 2008 from Democrat to Republican. That reflects a corporate sector discouraged by Obama's indifferent rhetoric and his economic policies, including his determination to push for higher taxes on the wealthy.

Up till now, big business has fared well during an otherwise-tepid recovery, with near-record corporate profits and a stock-market rally now entering its fourth year. But Wall Street is now forecasting a slowdown in earnings, and big businesses also stand to lose from the political dickering in Washington that will probably grow intense toward the end of the year. If Washington botches a huge set of decisions due over tax hikes and spending cuts, stocks could tank and big firms might start laying off workers once again.

Many smaller firms, by contrast, have endured four or five straight years of misery, so any improvement, no matter how small, might feel uplifting. If Obama could make a few new friends among their ranks, he'd surely take them.

Rick Newman is the author of Rebounders: How Winners Pivot From Setback To Success. Follow him on Twitter: @rickjnewman.