4 Key Points from our 7th Annual Middle Market Forum
April 15, 2019
- The middle market remains active and (relatively) optimistic.
57% of respondents expected modest growth in the Middle Market in the year to come, while 32% believed in a neutral outcome. Consistent with 2018, 80% of responded their company or their clients met or exceeded their projections in the previous year. A notable change from last year related to planned capital expenditures, where 42% of respondents planned no change – a 34% increase over the previous year.
- Finding adequately skilled employees is a primary challenge for middle market companies.
As the unemployment rate continues to hover around 3.8%, job openings in the economy continue to rise. For over a year, the number of job openings has outnumbered the unemployed individuals in the U.S. – the first time this has occurred since these statistics were first collected. These statistics are emblematic of the struggles of middle market companies to find and retain adequately skilled workers. Over 90% of respondents either agreed or strongly agreed that low unemployment has created challenges for Middle Market companies to find and retain skilled workers. In addition, over 80% stated that finding workers with adequate skills is the greatest challenge for Middle Market employers in 2019 relating to labor and staffing.
- More concern over interest rates as a barometer for the economy.
Auto production, GDP and the unemployment rate were important barometers to respondents in both last year and this year’s surveys. However, respondents this year showed far greater concern over interest rates. This is likely due to the actions of the Fed earlier this year, halting interest rate increases for the time being, as well as more recent speculation over whether the Fed will actually lower rates this year. Generally, the Fed uses interest rates to either fuel a slow economy, or dampen an overheated economy. The current economy is nearly 10 years into one of the longest expansions of all time, and with earnings forecasts being downgraded and inflation remaining suspiciously low, many believe a rate decrease would provide a spark to the economy. The Fed has yet to provide any indication that this is a possibility.
- A 2019 recession is unlikely, but 2020 is less certain.
Respondents, on average, found the likelihood of a 2019 recession to be 3.2 out of 10. However, a 2020 recession measured at 5.6 out of 10. The next recession will be tough to predict in terms of timing, and even tougher to predict in terms of the catalyst. With 10 years of good times behind us, only one thing is certain – economic expansions don’t die of old age.