Economic Development and Small Business & Startups

Business confidence remains high

Survey says small businesses statewide feel mostly hopeful; analysts say optimism in West Michigan rises despite talent crunch.

July 7, 2017
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GE Muskegon
The recently opened GE Brilliant Factory in Muskegon is an example of West Michigan businesses requiring a more skilled workforce for advanced manufacturing. Courtesy GE

A new survey shows that despite continued pressure on retail and a talent crunch across industries, Michigan small business owners are seeing mostly sunny skies this summer.

Womply, an online platform that collects data on merchants in the U.S. across 450 business verticals, released a 2017 Michigan Small Business Sentiment report June 26 that indicated 67 percent of Michigan small businesses are optimistic about their prospects for the rest of the year.

Locally, that number is much higher, say leaders at the Michigan Small Business Development Center (MI-SBDC) at Grand Valley State University and the Grand Rapids Area Chamber of Commerce.

In January, the chamber released a report that showed 93 percent of its members had favorable perceptions of the business climate for 2017.

Around the same time, GVSU economist Paul Isely forecasted a business confidence index of 80 percent for 2017.

David Smith, president and CEO at HR solutions provider The Employers’ Association, said the Womply survey, which polled merchants, doesn’t necessarily address the top concerns of TEA member companies, half of which are manufacturers.

He said while manufacturing and construction industries are going strong, they are experiencing a continued labor crunch that has them adjusting expectations for next year.

“Companies have said they are having a really strong 2017 but aren’t sure what’s happening in 2018,” he said.

“There are a lot of things building up to a healthy sense of pessimism. Employers are not panicking, not saying the sky is falling, but saying let’s take a wait-and-see approach.”

On the other hand, Zara Smith, strategic programs manager at MI-SBDC, said the small businesses her organization serves report higher levels of optimism than what the Womply report showed.

“In West Michigan, we are very positive about the economic outlook,” she said.

Keith Brophy, state director of MI-SBDC, agreed. They both noted the Womply report polled 2,800 businesses across the U.S. but didn’t indicate how many were in West Michigan.

The MI-SBDC relies on more regional-specific data, like the GVSU economic forecast and the Michigan Small Business Needs Assessment, said Jennifer Deamud, associate state director of the MI-SBDC.

“The (MSBNA) report indicated last year that 70 percent who responded say they have a strong growth desire. Twenty-three percent are staying stable with annual revenues. Six percent are decreasing in revenue. A lower number are preparing to close,” she said.

Brophy said manufacturing is strong.

“Manufacturing right now, especially in small business, is having a resurgence in some respects with advanced manufacturing. Retail might be lower because there’s a lot of pressure on retail right now.”

Baker said the confidence revealed in the chamber’s survey “cuts across all different industries,” but retail might be an exception.

“Retail is one of the sectors where the landscape is changing,” he said. “Now, with Amazon’s announcement of buying Whole Foods, they’ll have a whole network of brick-and-mortar locations, so there’s that element of stable/predictable that the retail community doesn’t have right now.”

Although the chamber only does one survey per year, Baker said he hasn’t seen anything to indicate the business outlook has changed since January.

“As you look at the investment in our community and the unemployment rate, those are the outcomes of their confidence,” he said. “Businesses are hiring, and the majority predicted that in early 2017.”

Baker said manufacturers are optimistic even though they’re not able to find the depth of talent they would like.

“Oftentimes, from a business perspective, the optimism comes from looking at their pipeline and the orders they have to fill. They’re looking at the funnel of work coming into the business and the view out for a period,” he said.

“Because this challenge of finding people has been a prolonged challenge for several years, companies have started to adjust how they work, finding other ways to get the work done rather than trying to hire. They may be looking but not successful in attracting.

“They understand the talent shortage is not a short-term thing, so they have to adjust their business model to be sustainable in the long term.”

Smith said manufacturers have become adept at workarounds.

They flex “by using college students rather than full-time employees,” he said, or “using automation instead of people.”

Baker said part of the issue is that fewer high school graduates are going into skilled trades.

“As a society, we projected this image on the generation going through school that if you didn’t go to college, you were lesser. We’re paying the price from the ’80s onward,” he said.

“We need to make a mental shift as a society about how we define success. As I look at the investment companies are making and expansions taking place, retooling of facilities and investment in staff, what I hear is that they could do even more if they could find the talent.”

Regardless, he said he shares the confidence of businesses and economists that 2018 will be a strong year for the West Michigan economy.

“Whether it’s professional, manufacturing, construction, all of them seem to be quite confident in the foreseeable future.”

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