Middle market companies continued to hire during the last year and the strong employment growth is expected to continue over the next 12 months, according to the Q3 2017 Middle Market Indicator (MMI) released by the National Center for the Middle Market (NCMM).
The MMI found that nearly half of all surveyed companies reported increases in employment over the same quarter from the previous year. On average, middle market company workforces increased 6.4 percent over the previous year, which represents the second highest year-over-year employment growth rate in the MMI's history. Middle market companies are just as bullish about their future employment growth. A third of surveyed companies plan to hire in the next three months, while 42 percent anticipate adding workers over the next year.
"The current rate of year-over-year employment growth is nearly double the average rate since the MMI began," said NCMM Executive Director Thomas A. Stewart. "Looking ahead, we see two trends that may collide. On the one hand, the middle market's appetite for new talent seems greater than ever; but at the same time, executives report real difficulties finding enough people to satisfy their needs."
Middle market companies are also experiencing some of their highest confidence levels as tracked over the past five years. At 88 percent, companies surveyed have never felt more confident in their local economies. Confidence in the global economy has also reached its second highest mark, with 74 percent expressing a positive view. Although national confidence has decreased since skyrocketing in Q1, it still enjoys a higher-than-average level at 83 percent.
"The impact of the middle market's confidence levels cannot be overstated," said NCMM Managing Director Doug Farren. "Maintaining high levels of confidence across the varying geographic measures is likely helping to bolster increases in anticipated revenue and employment growth."
Revenue growth is running at 7 percent, with seven in 10 companies reporting revenue growth over the past year. In an about-face, core and lower middle market companies – those with annual revenues below $100 million – reported faster revenue growth rates and a more positive future outlook this quarter than their counterparts with revenues between $100 million and $1 billion. The entire middle market expects 6 percent growth over the next year.
The middle market is more focused than ever on investing in the future. The number of surveyed executives who said they planned on investing extra cash instead of saving it rose to a MMI record setting 70 percent in the third quarter. And of the remaining 30 percent, half plan on saving that extra cash for future investments. More than a quarter anticipate adding a new plant or facility over the next 12 months.
Challenges for the Middle Market
Despite high reported and projected revenue growth, more than half of middle market executives say talent issues will be a concern. With competition constantly increasing, companies are worried about acquisitions occurring within their industries. Additionally, for the first time in the history of the MMI, more than one-in-five surveyed companies have ranked costs in their lists of top challenges.
For additional survey data and infographics, including in-depth looks at regional variations, hiring/talent acquisition efforts and other business concerns among middle market companies, visit http://www.middlemarketcenter.org.
The MMI, which was created in 2012, surveys 1,000 executives (CEOs, CFOs and other financial decision makers) from the middle market each quarter to examine topics related to business capabilities, performance, growth drivers and economic outlook among other topics. This quarter's MMI was fielded during the first two weeks of September 2017. It is weighted to accurately reflect the size, industry-wide and geographic distribution of this sector, which includes companies ranging from $10 million to $1 billion in annual revenue. The survey is conducted by RTi Research on behalf of the National Center for the Middle Market.