Pessimistic Midsize Companies Expect to Hire Less

Nov 2, 2012

Photographer: Tim Boyle/Bloomberg.

The October job numbers show underwhelming job creation, but judging by attitudes of midsize businesses, even this is threatened. A new survey from the National Center for the Middle Market (NCMM) finds that national economic confidence has worsened, and midsize businesses expect reduced revenues and hiring.

Fifty-two percent of midsize businesses, those with revenues between $10 million and $1 billion annually, said they were either “Not confident” or “Somewhat not confident” with the U.S. economy in the third quarter, up from 50% in the second quarter.

According to the survey, midsize companies’ job growth has been 2.2% over the last 12 months, which is higher than the pace of job creation in the entire economy (1.8%). Unfortunately these companies expect to slow their hiring increases to 1.3%.

Many issues worry midsized businesses, but two stand out: the cost of health care; and policy uncertainty. On health care, 91% of respondents fret about rising costs. An unnamed CEO of a communications company is quoted saying,

We are assessing alternative employee health care options. This is not our preference. We want to offer superior health care benefits to attract better employees but the competitive marketplace may not allow us to do so.

Policy uncertainty is also a concern (except if you're a certain Nobel Prize winning economist). Eight-four percent of respondents said they are worried about “The uncertainty of how government actions will impact my business.”

Some of that uncertainty stems from the fiscal cliff, tax increases and automatic spending cuts set to take effect on January 1, 2013. Citigroup and HSBC both worry that Washington won’t ease businesses fears. Citigroup’s senior global political analyst Tina Fordham expects the “continuation of the status quo” with a late-stage deal being cut. HSBC’s economists Kevin Logan and Ryan Wang are equally nervous, speculating that we will experience something similar to the “uncertainty and market volatility” that surrounded the 2011 debt ceiling fight. [See how Baker, Bloom, and Davis’ Policy Uncertainty Index spiked then.]

This worry from midsize companies matches the latest U.S. Chamber Small Business Outlook survey that found that 72% are very concerned about the fiscal cliff. No matter what size the company is business leaders are more pessimistic. According to Dr. Anil Makhija, NCMM’s academic director, this survey “shows that serious challenges for middle market companies are taking their toll, imposing lower expectations for employment and revenue growth in the year ahead.”

 [H/T Fortune’s Nin-Hai Tseng]

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