Business Optimism Holds Steady
Business confidence heading into the last three months of 2012 is holding steady—and in some ways stagnating—after slipping during the second quarter, according to Twin Cities Business’ quarterly economic indicator survey, to which 522 business leaders across Minnesota responded.
Overall, it appears that business is in a holding pattern, waiting for the outcome of the upcoming presidential election and more importantly, solutions needed by December 31 for the standoff over budget policy in Washington and the debt crisis in Europe. Such fixes are needed in their own right, but they also would help counter China’s economic slowdown and an overall decline in global demand for products and services that began during the summer.
Of the leaders who participated in the late-September survey, 33 percent said they expect overall business conditions in Minnesota to improve between now and the end of the year. That’s the same percentage that expected conditions to improve during the third quarter, and down from a six-quarter high of 50 percent expressing optimism during this year’s second quarter.
When it comes to overall global economic conditions, 26 percent of respondents expect improvement this quarter—again, about the same as during the third quarter and a sharp decline from expectations during Q2. A little less than half anticipate no change, while 31 percent believe global conditions will worsen.
The hiring outlook in Minnesota remains steady as well, with 35 percent of business leaders planning to hire between now and December 31—the same percentage that planned to hire during the third quarter, and down from a six-quarter high of 40 percent during the first quarter of 2012. Only 8 percent anticipate reducing full-time headcount between now and December 31.
These positive hiring expectations, however, continue to be offset by changes in the state’s overall labor market—including increasing levels of attrition and retirements, transitioning of full-time positions to part-time, and the creation of jobs in locations outside of Minnesota. As a result, total employment statewide has grown by less than 1 percent during the past 12 months.
Finding qualified talent remains a concern, as 25 percent of respondents expect it to become more difficult in the months ahead (about the same percentage who reported this concern heading into the third quarter). Only 7 percent believe finding qualified talent will be easier in the third quarter.
Employers also are increasingly voicing concern not only about finding good talent, but better utilizing and retaining existing talent. “We are rapidly growing and are challenged to recruit qualified manufacturing personnel,” one business leader wrote. “Our growth may be limited by our inability to find the right people.”
And many indicated they were holding steady on hiring until after November’s elections. “We will be in an expansion or a preservation mode. It all depends on the outcome of the fall elections,” another executive wrote.
Anticipated investing in research and development (18 percent of respondents expect to increase spending here) dropped for the third straight quarter and is near the same percentage reported heading into the third quarter of 2011.
Productivity gains also are expected to slow during the fourth quarter, with only 50 percent of businesses expecting productivity to increase in the months ahead. This is the lowest percentage in four quarters.
An email link to an online survey was sent to 15,654 Minnesota business leaders in mid-September; a reminder was sent the following week to those who had not yet completed the survey. The Minnesota Chamber of Commerce provided some of the email addresses used in this outreach. As of September 27, 522 businesses responded, resulting in a 3.3 percent net response rate. Of those who responded, 88 percent represented privately held businesses.