Northeast Midsize Companies Less Than Optimistic About Local Economy
March 10, 2020
Most small and midsize U.S. business leaders expect continued growth for their companies this year amid a less robust economic environment, according to the annual JPMorgan Chase Business Leaders Outlook survey. Three out of 4 businesses – 76 percent of midsize companies and 74 percent of small ones – are optimistic about their own performance, and the majority expect to grow sales this year (70 percent of midsize companies and 62 percent of small ones). They’re leaning into this expected growth through measures including more widespread adoption of new technology and increased hiring.
The national and global business outlooks are more cautious, with midsize companies reporting a drop in optimism from 2019. While more than half of midsize (59 percent) and small (52 percent) businesses remain optimistic about the national economy, this marks a decline of 14 and 3 points from a year ago, respectively. Compared to the rest of the country, midsize companies in the Northeast are more cautious about the local economy (50 percent optimistic vs. 63 percent all U.S.).
Also worth noting, midsize businesses in the Northeast are more likely to cite attracting new customers as their primary focus for growth strategies (72 percent vs. 64 percent all U.S.). Despite a more cautious outlook for the local economy, Northeast midsize business respondents are more likely to increase personnel in the year ahead (61 percent vs. 55 percent all U.S.).
Jim Glassman, senior economist at JPMorgan Chase, said there is an important caveat: slowing economic growth isn’t a sign of weakness. “While economic growth may not be as rapid as it was in previous years, the economy is still expanding, which is good news for small and midsize businesses,” he said. “We’ve generally found that growth expectations for small and midsize business leaders are more based on where we are in the economic cycle than in the election cycle, and currently we are in the part of the economic cycle during which the pace of economic expansion naturally settles down.”
Businesses want to hire to prepare for an expected uptick in sales, but a limited supply of qualified candidates is making it increasingly difficult to do so.
Midsize companies in New York are slightly more likely to hire (59 percent vs. 55 percent all U.S.). The percentage of companies planning to increase compensation is the same as at the national level (71 percent).
“This is actually good news for workers and is a reflection of the strong economy,” said Glassman. “Low unemployment means there are fewer people looking for jobs, so the job market is more competitive. This means companies looking to attract and retain talent are going to need to implement changes to be more competitive including better wages and benefits, which we’re seeing reflected in our survey.”
Businesses should get comfortable with today’s complex operating environment, and keep the following considerations in mind as they plan for the year ahead:
When it comes to preparing for disruption, even more business leaders are mobilizing to make changes now compared to 2019: 89 percent of midsize companies and 61 percent of small ones report taking actions including purchasing cyber insurance, creating contingency plans and designating individuals and teams to identify threats and opportunities. Businesses are also embracing emerging technologies to increase efficiencies and reach customers more directly.
“Business leaders clearly recognize that technology is driving change in their industries, and many are taking steps now to prepare for potential disruptions,” says Glassman. “The most successful businesses are using technology to stay ahead of the competition, drive efficiency and build a seamless customer experience. About 3 in 4 midsize businesses plan to use cloud computing, and half expect to incorporate data-driven target marketing in the year ahead.”
“How many of the community banks here believe their customer service is average or below average?”
The Bottom Line
Most financial institutions have tremendous excess capacity in their existing branches today.