Small and mid-sized business owners, like most American consumers, are increasingly concerned about economic conditions in the U.S., with two-thirds of them expecting a recession in the next six months, according to new data from Nationwide. Of those who expect a recession, more than 70% say it will be similar or even worse than the Great Recession of '07 – '09.

Just 19% of small business owners and 39% of mid-market business owners rate business conditions in the U.S. economy positively, down 8 points and 19 points, respectively, since September 2022.

Inflation, interest rates top of mind

Persistent inflation and rising interest rates continue to impact their businesses, with nearly three quarters of small and mid-size business owners citing inflation as their most significant challenge, up 11 points since September 2022.

Increased interest rates are right behind with 62% of mid-market business owners and 50% of small business owners saying it's a continued challenge (up 4 points and 15 points, respectively, from fall 2022).
Despite their grim views of the economy, most business owners (small-55%; mid-market-74%) are surprisingly optimistic about their own business operations.

74% of mid-market and 55% of small business owners rate their business conditions as good or excellent.
Returning to pre-pandemic practices

Business owners are even reversing some actions taken over the course of the pandemic, including:

Hiring more, laying off less:

21% of small businesses owners say they have hired more workers, up 8 points from the fall.
Only 6% of small businesses have laid off employees, a drop of 4 points from the fall.
42% of mid-market owners have hired new workers, an 18-point jump.
18% of mid-market businesses conducted layoffs within the past 6 months, down 5 points from the fall.
Managing supply chain disruptions:

21% of small businesses say supply chain disruptions are among their biggest challenges, a drop of 8 points from the fall.
31% of mid-market businesses list supply chain disruptions as one of their biggest challenges, consistent with their responses from the fall.
Staying open longer:

Only 10% of small business owners have reduced operating hours – down 7 points from the fall.
14% of mid-market owners have reduced operating hours, a decrease of 11 points.
These positive indicators demonstrate that business owners may be finding their footing in some areas as they continue to navigate inflation effects and rising interest rates.

Cutting costs remains a top priority for business owners (63% small business; 49% mid-market) as they hedge where they can to minimize risk.
"Business owners are closely analyzing today's economic uncertainty, but they're also confident in their operations as they manage through the conditions to best meet demand and remain competitive," says Russ Johnston, President of Business Insurance at Nationwide. "As business owners navigate the tight labor market to add staff, get back to traditional operating hours and explore cost-saving strategies, it is imperative that they review risk and ensure the business does not compromise on long-term protection."