Small businesses are optimistic about their outlook, thanks to coronavirus vaccines, but still expect the economy to take months or longer to return to pre-pandemic levels, a new survey shows.

The MetLife/U.S. Chamber Small Business Index for Q1 2021 indicates that conditions are slowly improving.

Small business outlook by region. Source: MetLife/U.S. Chamber Q1 2021 Small Business Index.

The Small Business Index of 55.9 for the first quarter of 2021 is up slightly from 52.9 in the last quarter of 2020 but far below the 71.7 rating from quarter one of 2020.

The rating, which measures small business activity, hit an all-time low of 39.5 in the second quarter of 2020.

“The SBI has been steadily increasing over the past few quarters, but still has a ways to go to get back to levels seen before the pandemic,” the chamber noted.

The cautious optimism of small businesses shown in the Jan. 14-27 survey is fueled by the steady rollout of COVID-19 vaccines across the country.

“The distribution of the vaccine does appear to be lifting spirits,” the report said.

Hiring Outlook

“More than half of small business owners say that the vaccine makes them more optimistic about the future of their business (54%).”

In a further sign of optimism, the survey notes that 62% of small businesses report cash flow comfort, which is close to the Q1 2020 cash flow comfort level of 65%.

“Another potential positive sign, more small businesses are expecting to hire in the coming year,” the chamber said.

Nearly one-third (32%) of small businesses plan to increase hiring over the next year, up 5% from Q4 2020.

“Many anticipate keeping staff levels steady: Almost half (49%) of small businesses plan on retaining their current staff size over the next year.”

But a majority of small businesses—59%—predict it will take from six months to one year to return to normal.

Minority-Owned Firms

The survey also found that most minority-owned businesses no not share that optimism.

The survey found 86% of minority-owned businesses are concerned about the pandemic’s impact on their businesses, compared to 72% of non-minority-owned small businesses.

It also shows that while 67% of non-minority-owned small businesses are concerned about employee mental health, the number jumps to 82% for minority-owned businesses.

The survey found 86% of minority-owned businesses are concerned about the pandemic’s impact on their businesses.

In addition, minority-owned small businesses (88%) are more likely than non-minority-owned small businesses (68%) to provide employees with some type of mental health resources.

But while small businesses are hopeful about their own outlook, they’re more pessimistic about the country’s prospects.

The overall U.S. economy is poor, according to 59% of small businesses. That’s close to the 58% recorded in Q2 2020, but far higher than Q1 2020, when only 12% of small businesses said the national economy was poor.

Other Findings

Some other survey findings:

  • 52% of small businesses are likely to require employee vaccinations
  • 52% say their business is in overall good health (down from 66% in Q1 2020)
  • 70% are concerned about their employees’ mental health
  • 67% are concerned about employee morale
  • 17% increased staff over the past year (the same amount as Q1 2020)
  • 35% plan to increase investment
  • 47% anticipate revenue growth this year