Business Expect Success in 2020, But Have Doubts About Economy

Northeast Midsize Companies Less Than Optimistic About Local Economy

Keith Griffin

February 13, 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.”

Hiring from a Shrinking Talent Pool

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. 

  • For the second consecutive year, midsize businesses rank this as the #1 challenge, constrained by a lack of applicants and unique skills needed for the job. This is a reality for small businesses as well: 31 percent report that they are extremely or very concerned about the candidate supply, up from 28 percent last year. 
  • Still, businesses are forging ahead: 55 percent of midsize businesses and 39 percent of small ones expect to increase full-time employees over the next year. Small businesses also expect a jump in part-time employment, with 38 percent planning to hire, up 7 percentage points from 2019. 
  • To retain talent, businesses plan to increase compensation, improve benefits and provide flexible hours.

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.”

Planning For the New Decade 

Businesses should get comfortable with today’s complex operating environment, and keep the following considerations in mind as they plan for the year ahead:

  1. Don’t be fazed by the US economy’s new normal. The durability of today’s expansion is unlike anything we’ve seen before. Rather than compare to business cycles of the past, look instead to key metrics like unemployment and inflation to get a fuller picture of the economy’s health. With strong fundamentals and no clear recessionary trigger, it seems likely the expansion could continue at a slower pace for a sustained period.
  2. Embrace technological change head-on. The most successful businesses are using technology to stay ahead of the competition, drive efficiency and build a seamless customer experience. Evaluate the latest tools to make sure your business isn’t left behind. Learn more.
  3. Educate staff on cybersecurity. With the pace of cyberattacks rapidly accelerating, 2020 is the year to make cybersecurity a priority. Defenses are only as strong as your least-prepared employee, so investing in training and controls can help protect against the threat of sophisticated attacks. Learn more.
  4. Make your values central to your business. In a tight labor market, defining and investing in your company’s environmental, social and governance priorities can be a differentiator in employee recruitment and retention. Learn more. 
  5. Take advantage of global expansion. Despite geopolitical complexities, international business opportunities are too significant to ignore—and the ease of technology and travel make them more accessible than ever for companies. Evaluate global markets and supply chains carefully to determine how to best tap into new markets. 

Leaning into Disruption

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. 

  • For midsize businesses, cloud computing is expected to be the most widely deployed technology for 2020, with 73 percent planning to use it, followed by data-driven targeted marketing (50 percent) and application programming interfaces (APIs) at 46 percent. 
  • Small businesses are increasingly feeling the impacts of e-commerce disruption, but 57 percent feel confident in their ability to manage this challenge. 

“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.”

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