MMAC: Business outlook survey second quarter, 2022

MILWAUKEE — Continuing gains in metro area business activity are forecast in 2022’s second quarter, with expectations tempered by inflation and labor shortages, according to a Business Outlook Survey conducted by the Metropolitan Milwaukee Association of Commerce (MMAC). Seventy percent of businesses surveyed see sales increases in 2022’s second quarter, 54% see profit gains and 49% expect job gains vs. year-ago levels.

“Milwaukee area businesses remain optimistic regarding future business activity but have become more tempered in their optimism. Levels of optimism expressed on sales, profit and employment are all modestly lower than first-quarter expectations in our previous survey,” said Bret Mayborne, MMAC’s economic research director. “In aggregate, businesses expect local economic growth to continue through 2022’s second quarter and for the year as a whole.”

Companies surveyed were also asked about future work arrangements for their local operations. Overall, 38% of those surveyed indicated a high level of workforce flexibility in their work arrangements while 43% indicated some flexibility. For employers with hybrid arrangements (onsite/offsite mix) the largest number of employers indicated three days as the desired number of days per week for workers to be onsite. 

The Business Outlook Survey, conducted by the MMAC, contains responses from 77 Milwaukee area firms, both large and small, employing more than 21,000 people.

Detailed survey results follow.    

Second Quarter 2022 Expectations

The trend in sales optimism is somewhat mixed. Currently 70% of all businesses surveyed predict real sales gains in 2022’s second quarter (vs. year-ago levels), 16% see sales declines and 14% expect no change. The percentage predicting second-quarter growth is down marginally from the 75% who forecast first-quarter gains. 

There is little variation by industry or employment size in second-quarter sales expectations. By industry, 71% of non-manufacturers see second-quarter sales growth while 69% of manufacturers see such gains. Seventy percent of large employers (100+ employees) forecast second-quarter sales gains equaling the 70% for small employers.

Regarding profits, 54% of all Milwaukee area businesses see higher profits in 2022’s second quarter (vs. year-ago levels), lower than the 63% who forecast first-quarter profit gains. Twentyfive percent see profit level declines for the second quarter while 21% see no change.  

Employment growth in the metro area has been slow and steady in 2022’s early months.  Jobs have grown at a 1.6% average year-to-date rate vs. year-ago levels led by strong gains in the leisure & hospitality and manufacturing sectors. The current rate is slightly higher than the 1.5% pace registered in 2021 final three months. 

Survey results suggest that this pattern is likely to continue with nearly one half (49%) of those surveyed seeing year-over-year growth in the year’s second quarter. This ranks nearly five times higher than those expecting job declines (11%) while the remaining 40% see no change. The current percentage expecting job gains is down moderately from the 53% who forecast first quarter increases. 

Variations by industry or employment size are small. By industry, 52% of manufacturers predict second-quarter job gains (vs. year-ago levels), somewhat higher than the 48% of nonmanufacturers who forecast growth. By employment size, large employers – with 51% seeing second-quarter 2022 gains – are slightly more likely to predict employment growth than small employers, where 47% see gains.

Price inflation and labor shortages are likely driving potential future wage and salary increases. Overall, an average increase of 5.7% is forecast for average per person wage and salary increases for the next 12 months, a considerably higher rate than that predicted in recent years. Average forecast gains were highest in the non-manufacturing (up an average 6.5%) and small business (up an average of 6%) sectors.

Expectations for the calendar year 2022 as a whole are muted from those expressed in our survey three months ago. Currently over two-thirds (69%) of businesses surveyed see real sales gains for 2022. This percentage is down from the 80% predicting such gains at the beginning of the year.  

Currently, by industry, manufacturers are more optimistic than non-manufacturers (76% see 2022 gains vs. 65% respectively.) By size 73% of small businesses see annual sales gains vs.

65% among large employers.

Business Concerns Going into 2022’s Second Quarter

Historically high price inflation rates and low unemployment rates likely influenced top business concerns at this point in the year. Among concerns listed as options in the survey, price inflation and labor shortages ranked in order as the most concerning to businesses surveyed. Supply chain issues and continuing economic growth ranked as moderate concerns, while office reopening plans were cited on average as of least concern among those listed. For manufacturers, the importance of supply-chain concerns rose to one of the top two concerns.

Business Plans for a Post-Pandemic Workplace

A number of questions were asked regarding employers’ plans for a post-pandemic workplace.  For many of these questions there was not a definitive answer, reflecting mixed results for varied circumstances. By and large, most of those surveyed indicated some flexibility in having employees work remotely: 38% said they had a high level of flexibility for all employees while 43% indicated they had some flexibility depending on the employee’s role and responsibilities.  Only 20% of companies surveyed indicated limited flexibility or that they had no remote workers.

For roles that can be hybrid, the largest number of responses placed the preferred number of days per week that employees would be in the office at three (34%). Two days (22%) and four days (13%) followed in order. In terms of determining the preferred number of days in the office, 40% of employers were providing guidance on the number while 32% were requiring a specific number. Additionally, 31% of respondents indicated that they were tracking attendance of their remote workers while 42% were not checking attendance. 

Employers were also asked about what strategies they are using to attract or retain workers. Multiple responses were allowed, but the most frequently cited strategy was increasing salaries, mentioned by 78% of those surveyed. Making improvements to company culture (64%), and greater flexibility on remote work and/or scheduling (59%) followed next in order by percentage of respondents who cited them.