In the News
The nation's nearly 200,000 middle market companies plan to hire 1.4 million new workers over the next 12 months, which is half a million more jobs than projected at the beginning of 2014. According to the National Center for the Middle Market's (NCMM) latest quarterly Middle Market Indicator (MMI), this resurgence in hiring is being fueled in part by less uncertainty originating in Washington, enabling mid-market executives to shift their focus toward attracting skilled talent, addressing wage pressures, and accessing capital. Based on the latest MMI growth projections, the NCMM estimates middle market firms (with annual revenues between $10 million and $1 billion) will create 59 percent of all new jobs in 2014.
"These findings confirm that mid-sized companies are the unsung heroes of American business," said Tom Stewart, Executive Director for the NCMM, a collaboration between The Ohio State University Fisher College of Business and GE Capital. "Growing faster than S&P 500 companies and creating more jobs than their small and large business peers, the middle market is a critical factor in stabilizing and growing the U.S. economy." Mid-sized firms represent only three percent of all American businesses, yet contribute one-third of private GDP and employ one-third of private U.S. workers.
Performance gains accelerating
According to the latest MMI survey of 1,000 middle market executives, strong employment and revenue performance are driving increased confidence and growth projections for the year ahead. Revenue growth over the past 12 months was 6.5 percent, which represents a 1.5 point increase over last quarter's results and is significantly higher than the S&P 500's growth rate of just 0.5 percent during the same time period.
Mid-market executives also report a 1.2 point gain in employment growth over last quarter, to 3.7 percent. By comparison, small and large companies grew employment at 2.1 percent and 2.6 percent respectively, according to the ADP Jobs Report. Lower middle market firms (with annual revenues between $10 million and $50 million) report particularly notable employment growth, from 2.2 percent last quarter to 3.6 percent this quarter.
Optimism for 2014
Confidence among mid-market executives is increasing alongside accelerating gains in revenue and employment growth. In its ninth edition, the MMI finds that confidence in local economies reached an all-time record at 81 percent, while national and global confidence at 64 percent and 57 percent, respectively, are significantly higher compared to the same time last year.
Executives' growth projections for the year ahead give reason for optimism as well. Mid-sized firms are projecting 4.5 percent revenue growth for the next 12-month period, a modest increase over last quarter's projection at 4.3 percent. When it comes to job creation, middle market companies project growth at 3.2 percent, which is a full percentage point higher than last quarter.
What's more, nearly two out of three mid-market executives plan to invest in their businesses. Forty-eight percent of mid-sized firms expect to introduce a new product or service, and 23 percent plan to add a new plant or facility.
Stewart said, "The middle market's encouraging projections for 2014 continue their trend of robust growth. Year after year, mid-sized firms increase revenue projections and hit their targets, showing how strong these companies are."
Shifting views on Washington
Middle market executives have consistently cited government uncertainty and health care costs as top concerns, with 34 percent and 46 percent, respectively, citing them as highly challenging this quarter. While still big numbers, these challenges have declined double-digit compared to last year.
Instead, middle market firms are confronting challenges associated with business expansion rather than issues arising from Washington politics. For example, 75 percent of mid-market executives identified the ability to attract, train and retain talent as highly or somewhat challenging. In addition, more than half of surveyed executives identified access to capital and labor difficulties as barriers to future growth.
At the same time, DC is also taking a greater interest in the importance of middle market firms. "We are encouraged by the formation of the Congressional Caucus for Middle Market Growth, recently announced by Congressmen Steve Stivers, Jared Polis, Tom Rice and Brad Schneider," said Stewart. "This critical initiative serves the dual purpose of recognizing the role of the middle market in catalyzing growth nationwide and providing a policy platform in the halls of Congress to discuss the needs of this sector going forward."
About the Middle Market Indicator
The MMI surveys 1,000 executives (CEOs, CFOs, and other C-Suite executives) from the middle market's nearly 200,000 companies, focusing on their business capabilities and performance, growth drivers, and economic outlook. This quarter's MMI was fielded March 10 to 20, 2014. It is weighted to accurately reflect the size and geographic distribution of this sector, which includes companies with revenues between $10 million and $1 billion.
The quarterly MMI tracks responses on the following topics: Gross revenues performance; Overall company performance; Employment performance; Expected 12-month gross revenue and employment growth; Confidence in the global, U.S. and local economy; Key business challenges; Top areas for investment dollars; Perceptions on topical issues and challenges relevant to the U.S. middle market.
The survey is conducted by the independent research firm RTi on behalf of the NCMM.
About the National Center for the Middle Market
The National Center for the Middle Market (NCMM) was founded in 2011 in partnership with GE Capital and is located at The Ohio State University Fisher College of Business. The Center is the nation's leading research institution dedicated to helping middle market companies be more competitive through impactful research, thoughtful advocacy, and educational programs. To learn more about the Center or the MMI, visit www.middlemarketcenter.org.