From a macroeconomic point of view, the US has millions of fewer jobs that existed before the still-raging COVID-19 pandemic hit in 2020, along with high inflation, a tight labor market and rising interest rates. Things can only get better, right?
Many Americans have grown wary of that kind of thinking, and for good reason. The pandemic alone has given people multiple periods of false hope, and when you mix in things like climate change and an unstable democracy, hope can seem like one of those things that got left behind in 2020, along with three-hour commutes to one-hour meetings.
And yet the 2022 Capital Markets Forecast, an annual report released by M&T Bank subsidiary Wilmington Trust, showed that business owners are optimistic about their companies in 2022 — 87% of the more than 1,000 leaders surveyed nationwide. Meanwhile, 77% are optimistic about the US economy overall.
Economist Luke Tilley, who leads the team at Wilmington Trust that puts out the report, says it makes sense.
“There are reasons to not be worried,” he told Technical.ly. “We think that businesses have done so much in terms of changing the way that they operate, relying more on technology, investing in new software and adapting through the pandemic, that they’re able to produce more with less people. As an economist, I think of it as productivity. Higher productivity means that inflation is going to come down this year.”
There are also signs that there have been a lot of new businesses cropping up. The Great Resignation has led to labor shortages in multiple industries, and despite the stereotype that Americans just don’t want to work, the number of people reporting to the government that they are working has been increasing at a faster rate than the number of new hires reported by established companies.
A lot of that, to be sure, is that some people who quit jobs have settled into the gig economy, where there is always a grocery order to fill or a pizza to be delivered.
"Times of disruption like this are the times when we typically see a lot of new business creation."
But, Tilley says, it could also be from new startups, many of which are literally being built to exist in a pandemic-tinged — and post-pandemic — world. Indeed, a report from DC’s Economic Innovation Group released this week found that new business applications were the highest on record in 2021 — 5.5 million, up from 2020’s record of 4.5 million.
“A lot of our business owners have this sense of optimism,” said Nick Lambrow, M&T Bank Delaware regional president. “If you look at it, in any of these down cycles, one thing you have to appreciate about American business is that they learn adapt, whether it be technology or automation. We’re seeing existing business owners adapt their own business model, and I think that’s part of the optimism.”
Or maybe they just know their economic history.
“Times of disruption like this are the times when we typically see a lot of new business creation,” Tilley said. “The current environment is taking that traditional evergreen statement that disruption causes opportunity and putting it on steroids. There’s just so much disruption right now, and there’s so much opportunity that we expect to see as a lot of new businesses form.”
There has also been a culture shift that opens up new opportunities, as more and more people choose not to go back to their previous way of working. Would-be entrepreneurs may have accumulated savings and reevaluated their priorities, for instance.
While a shrinking labor force is one of the biggest challenges for existing businesses, it also opens up opportunities for businesses open to change. Old firms need to adjust to the new paradigm by giving workers better tools and options for remote work, and automating where work is redundant.
All this could be good news for people just starting a new business is the current economy, where, Tilley said, just the fact that the business is being built in this environment just might give it a leg up: “A new firm is being created in the new paradigm with the technology in place, as opposed to needing to make challenging changes.”