Midsized firms an underappreciated jobs engine: GE

COLUMBUS, Ohio Thu Oct 6, 2011 10:33am EDT

General Electric CEO Jeff Immelt makes a speech during a ''Jobs for America Summit'' at the U.S. Chamber of Commerce in Washington, July 11, 2011. REUTERS/Jonathan Ernst

General Electric CEO Jeff Immelt makes a speech during a ''Jobs for America Summit'' at the U.S. Chamber of Commerce in Washington, July 11, 2011.

Credit: Reuters/Jonathan Ernst

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COLUMBUS, Ohio (Reuters) - American family lore holds that the middle child is often the least appreciated -- not as cute as the baby and constantly struggling to catch up with the accomplishments of the firstborn.

There is a parallel in corporate America: the 200,000 companies that make up the "middle market," bigger than the start-ups and small businesses that attract government help but not as hefty as the big businesses whose revenues have passed $1 billion and have Wall Street's backing.

According to an analysis by General Electric Co and the Ohio State University Fisher College of Business, these companies, which together generate more than $9 trillion in annual revenue, are an underappreciated driver of employment: They account for one in three U.S. jobs and continued to add workers -- 2.2 million of them -- during the recession, when their larger rivals shed some 3.7 million employees.

Even so, with the memory of the 2008 credit crisis still fresh, these companies are also worried about their finances, GE Chief Executive Jeff Immelt told reporters.

"They have access but they're worried," Immelt said. "This is a lot different than 2008, guys. There is liquidity, there are pockets of growth, and I think people have confidence that they might be able to find the right pockets of growth."

MORE LABOR-INTENSIVE

Two factors contribute to their continued hiring, the report found. Even during the recession more mid-sized than large companies grew revenue and they are generally less able to automate processes than their larger peers.

"Middle market firms are, by nature, more employee-intensive than large firms," the report found. "Their processes and systems are typically less mature than those of large corporations, so they tend to compensate by hiring more people."

Mid-sized companies employ 80 percent more workers per dollar of revenue that they generate than their larger rivals, according to the study, based on a poll of 2,028 executives, including 1,447 from middle-market companies.

While GE, the largest U.S. conglomerate with $147.97 billion in forecast 2011 revenue, is far from a mid-sized company, those are a core market for its GE Capital finance arm, which loans money and leases equipment to them.

Fairfield, Connecticut-based GE, along with fellow large U.S. companies including FedEx Corp, on Thursday is convening several hundred executives and academics in Columbus, Ohio, for a summit intended to discuss the role that mid-sized companies play in the U.S. economy.

MORE PLAN TO ADD WORKERS

At a time when stubbornly high unemployment -- which has hovered near 9 percent for more than two years -- remains one of the biggest problem spots in a sluggish U.S. economy, more mid-sized than large companies are planning to add jobs.

A related GE Capital study released on Monday found that 68 percent of chief financial officers of middle-market companies, defined as those with more than $10 million and less than $1 billion in annual revenue, plan to hire more people over the next year. That is nearly double the 36 percent of chief executives of large U.S. companies who plan to add jobs over the next six months, according to a Business Roundtable survey of its members released last week.

Job creation has been an area of particular focus for GE's Immelt since he signed on as a top adviser to the Obama administration on jobs and the economy early this year. He has repeatedly said that GE, which like many of its peers reduced its headcount by tens of thousands during the downturn, plans to hire some 15,000 people in the United States this year, a figure that includes both new positions and people to fill jobs that become vacant.

(Reporting by Scott Malone; Editing by Phil Berlowitz)

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