About the survey
In January 2024, the D.C. Policy Center’s Rivlin Initiative on Economic Policy & Competitiveness launched its quarterly Business Sentiments Survey. The goal of the Business Sentiments Survey is to provide detailed, real-time information on the experiences of businesses in D.C. and the broader region to elected officials, the media, and the public. Conducted quarterly, the survey examines business performance over the past three months, economic expectations for the next six months, and covers special topics such as public safety, location considerations, talent acquisition, and access to capital.
In its inaugural year, the survey tracked the sentiments of established businesses—large and small.
In its inaugural year, the Business Sentiments Survey documented the sentiments of a diverse group of businesses in D.C. and the broader region. Over the course of the year, the survey expanded its reach. The first round had 91 respondents, the second surged to 411, the third included 214, and the fourth concluded with 220 participants.
In the first round, the survey captured responses from large, established businesses, particularly those in the real estate sector and, to a lesser extent, the professional, scientific, and technical services sector. In subsequent rounds, the respondent pool shifted toward small, established businesses, with the professional, scientific, and technical services sector consistently making up the plurality of participants.
The shift in composition resulted from a change in recruitment strategy: the first round relied on social media, email, and word of mouth, while subsequent rounds drew respondents from a comprehensive list of registered D.C. businesses.
Despite respectable sample sizes, we classify our findings as qualitative, as they, like any survey results, are subject to certain limitations.[1] With these considerations in mind, this article highlights five key insights from the survey’s inaugural year.
Finding #1: A jurisdiction’s tax and regulatory regime carries weight in business location decisions.
A majority of survey respondents emphasized the importance of a jurisdiction’s tax and regulatory regime in business location decisions.
With respect to taxation, the sentiments suggest that businesses might have become more responsive to modest tax changes following the COVID-19 pandemic. This result aligns with other survey evidence. For instance, a survey conducted in both 2019 and 2020 found that tax exemptions and corporate tax rates ranked higher as considerations in executives’ business location decisions in 2020 compared to 2019. Previous economic research has typically found that while taxes shape behavior, modest tax changes are unlikely to influence location decisions in a decisive way. If these sentiments reflect increased responsiveness to tax changes, it would be prudent for the District’s tax policies to account for these shifts.
With respect to regulation, participants’ sentiments indicate a need for periodic review and refinement of business regulations. Such a task is challenging. Many of the regulations that affect businesses are spread across multiple agencies. Nevertheless, the task is essential to ensure that regulations are kept up to date and cost-effective.
Finding #2: Pessimism about the District’s economy slightly eased at the end of 2024.
When asked about their expectations for the District’s economy over the next six months, respondents expressed pessimism for much of the survey’s inaugural year.
The pessimism may reflect the lackluster economic recovery since the COVID-19 pandemic, with the District underperforming the region and the nation. For example, between January 2023 and March 2024, nonfarm employment growth in the District lagged behind national nonfarm employment growth.
Optimism about D.C. began to emerge by round four, with more respondents in that round expecting a stronger D.C. economy rather than a weaker economy over the next six months. This optimism coincided with a recent uptick in the District’s nonfarm employment growth. Between August and November of 2024, nonfarm employment grew by 2.4 percent.
Finding #3: Hiring or retaining employees has become more difficult since the pandemic.
Surveyed businesses reported that hiring or retaining employees became more challenging since the pandemic. This sentiment aligns with responses to related questions. When asked about changes in employee numbers in the past three months, respondents across all four survey rounds often reported minimal to no change. This lack of movement in employee numbers may reflect the difficulty businesses face in attracting talent. Similarly, when asked about their six-month outlook, most anticipated no change in employee numbers at their respective businesses.
Surveyed businesses identified lack of relevant technical skills, lack of experience, and applicants’ salary expectations as the top hiring challenges. Businesses reported increasing wages or benefits and increasing schedule flexibility as the main means of addressing these challenges.
Finding #4: When deciding where to locate, businesses prioritize appearance and accessibility.
When making location decisions, surveyed businesses indicated that they place considerable weight on the appearance and accessibility of a jurisdiction. Businesses were repelled by signs of vacancy or blight and preferred locations that are walkable or easily accessible by public transportation.
Although not explicitly asked in the survey, it is likely that businesses avoid jurisdictions with elevated levels of crime. In response to elevated levels of crime in 2023, a number of surveyed businesses invested in crime prevention measures, such as installing security cameras and hiring security personnel. The costs of these investments reflect the financial burden businesses face because of elevated crime. With lower levels of crime, such funds could have been used for growing the business.
Finding #5: Businesses that pursued outside funding struggled to obtain the desired amount.
A fair number of businesses that participated in the survey indicated that they had attempted to secure lines of credit or debt financing over the past year. However, many of these businesses faced challenges in obtaining the desired amount of external funding. High interest rates and burdensome application processes were the top two reported obstacles.
Plans for 2025
In 2025, the Rivlin Initiative will continue conducting the survey in January, April, July, and October. Our goals include:
- Increasing participation beyond the inaugural year’s strong sample sizes.
- Developing a business sentiment index.
- Using the survey data to inform and support legislative proposals.
- By expanding its reach and refining its tools, the Rivlin Initiative aims to provide actionable insights to guide policymakers and support the District’s business community.
Read more about each round in 2024
[1] For example, one cannot assume with a high degree of confidence that the sentiments expressed by survey participants represented those who did not fill out the survey.