According to the annual JPMorgan Chase Business Leaders Outlook report released today, American business owners are feeling better than they have in years.
The reasons? The report cites recent regulatory reform, corporate tax cuts and a steadily improving economy.
But it’s not all sunshine and roses. They’re getting nervous about finding the skilled workers they need to grow as their older workers retire.
“This trending positivity is confirmation that something real is happening in the economy,” said Jim Glassman, senior economist at JPMorgan Chase, in a news release. “Business optimism translates to business activity, which is why we’re seeing increased expectations across the board. For businesses that can hire and retain talent in today’s tight labor market, there are growth opportunities to capitalize on.”
Businesses of all sizes are concerned about the supply of qualified candidates with 45 percent of midsize business executives saying they are extremely or very concerned about the issue, with 31 percent of their small business breathen voicing similar concerns.
Among midsize businesses, optimism is up across the board, year over year:
• 69 percent are optimistic about the global economy, more than double last year’s sentiment and the highest since the survey began eight years ago
• 89 percent are optimistic about the national economy, up 9 points vs. last year
• 75 percent are optimistic about their local economy, up 7 points vs. last year
Among small businesses, optimism for the global and local economy is the highest it’s been in several years:
• 51 percent are optimistic about the global economy, up 10 points vs. last year
• 63 percent are optimistic about the national economy, consistent with last year
• 60 percent are optimistic about their local economy, up 5 points vs. last year
The new tax law is front and center for midsize businesses, with most (91 percent) expecting it to help their business. Only 37 percent of small businesses expect it to positively impact their business’s bottom line while almost an equal number expect no impact (30 percent).
And what are midsize businesses planning to do with their tax savings? They plan to:
• Pay down debt: 44 percent
• Invest in capital expenditures: 43 percent
• Increase wages: 33 percent
When it comes to hiring and pay, midsize businesses indicate they are also more likely to boost spending:
• Increase hiring of full-time personnel: 64 percent, up 7 points vs. last year
• Boost compensation: 76 percent, up 5 points vs. last year
Small businesses, meanwhile, indicate they are more likely to hold the line:
• No changes to full-time personnel: 65 percent, consistent with last year
• No change in compensation: 56 percent, consistent with last year
What midsize businesses are thinking about business expectations and challenges:
• They expect to increase sales (82 percent), profits (75 percent), capital expenditures (42 percent) and credit needs (30 percent), all up year over year
• Their top challenges for 2018 are:
o Increasing sales: 63 percent, down 8 points vs. last year
o Limited supply of talent: 54 percent, up 10 points vs. last year and increasing every year since 2014
o Managing labor costs: 50 percent, up 4 points vs. last year
• The most common reasons for the talent shortage are a lack of applicants (52 percent), unique skills needed (50 percent) and applicants’ work ethic (39 percent)
What small businesses are thinking about business expectations and challenges:
• Many expect an increase in sales (62 percent) and profits (59 percent)
• Their top challenges for 2018 are:
o Increasing sales: 54 percent, up 16 points vs. last year
o Taxes: 28 percent, consistent with last year
o Uncertainty of economic conditions: 27 percent, down 7 points vs. last year
• Likely reflecting recent tax reform, fewer small business executives would select lowering taxes as a top area for the government to focus this year: down seven points from last year and 11 points from 2016. Proposed focus areas growing this year: Create and foster a skilled workforce (23 percent) and improving infrastructure (36 percent) are all up vs. last year.
For more information on the survey, visit jpmorganchase.com/businessleadersoutlook