Middle Market Companies Leading U.S. Recovery, Adding 1.2MM Jobs Over Past 12 Months

Wed Oct 30, 2013 7:30am EDT

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Middle Market Companies Leading U.S. Recovery, Adding 1.2MM Jobs Over Past 12 Months

Uncertainty cuts Q3 employment outlook by nearly 200K jobs, NCMM survey shows

Mid-sized firms are on track to add more than 1.25 million jobs in 2013, which would account for 7 out of every 10 new jobs created this year. In addition, the nearly 200,000 companies representing the U.S. middle market grew revenue at 5.5% over the past 12 months, more than double the rate of S&P 500 companies, according to the National Center for the Middle Market’s (NCMM) latest quarterly Middle Market Indicator (MMI). The report is being released today at the third annual National Middle Market Summit at The Ohio State University.

The U.S. middle market, made up of businesses with revenue between $10 million and $1 billion, contributes one-third of non-government U.S. GDP and accounts for 44.5 million jobs, or one-third of total U.S. employment. Between 2007 and 2010, U.S. middle market firms created 2.2 million jobs while large corporations cut more than 3 million jobs. The mid-market continued to outperform in job creation, with more than 2 million new jobs created between 2010 and 2012.

“Middle market companies defy even their own expectations on performance. This is a dynamic group of companies that continue to lead the U.S. economic recovery, but whose growth is stalling in light of the recent government uncertainty,” said Dr. Anil Makhija, Academic Director at NCMM, a partnership of GE Capital and The Ohio State University Fisher College of Business.

Uncertainty Plaguing Mid-Market Growth – Job Growth Projections Cut by 180,000

While annual growth trends are positive, this quarter’s MMI revealed a distinct moderation in quarterly gains as well as in employment, revenue, investment and confidence growth projections in the year ahead. The employment outlook over the next 12 months fell by almost 200,000 between Q2 and Q3, with middle market companies expecting to add around 900,000 new jobs. This comes as 47% of companies said that government uncertainty was highly challenging to them, a strong increase over Q2.

“Within the past year, markets have been roiled by the uncertainties arising out of fiscal cliff, sequestration, government shutdown, and the threat of default. The consequences of these macro-crises are clearly impacting job creation with middle market companies intending to create 200,000 less jobs over the next 12 months,” said Makhija.

As revenue growth slipped from 5.8% in Q2 to 5.5% this quarter, executives cut forecasts in the year ahead to 4.4%. This quarter’s MMI also indicated that executives’ willingness to invest dipped from 64% in Q2 to 61% in Q3. Likewise, confidence in the U.S. economy is down 3% from last quarter – at 61% – after experiencing a 7% bump between the first and second quarters of the year.

The Impact of Continued Uncertainty

Washington’s latest agreement to reopen the government and extend the debt ceiling sets the stage for another potential crisis of confidence early next year. 45% of the executives surveyed indicated a government default would have direct impacts on their businesses with higher interest rates, reduced business and consumer confidence, and reduced confidence in the credit worthiness of the U.S. Some 94% of the middle market executives consider the higher interest rates as the most adverse impact of the U.S. default on debt.

“This data should be a warning to policymakers that continued brinkmanship in Washington will have real consequences on economic growth nationwide,” Makhija said.

Survey Methodology - 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 September 5-15. 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 economy, U.S. economy 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.

Background – 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's Fisher College of Business. The Center is the leading source of research on the U.S. middle market economy.

Over the past three years, the Center has awarded 25 research grants, engaged more than 300 undergrad and MBA students and connected with more than 3,000 business executives to learn more about this segment. Learn more at www.middlemarketcenter.org.

Background - GE Capital:

GE Capital is one of the world’s largest providers of credit and expertise. For more than 1 million businesses, GE Capital provides financing to purchase, lease and distribute equipment, as well as capital for real estate and corporate acquisitions, refinancings and restructurings. GE Capital is a leader in a number of industries, from airlines, healthcare and energy financing to fleet, franchise and middle market corporate finance. For approximately 60 million consumers, GE Capital offers credit cards and retail sales finance programs. GE Capital is an extension of GE's rich heritage of building and supporting growth, providing customers with insight, knowledge and expertise in addition to financing. Learn more at www.gecapital.com.

GE Capital
Jeff Caywood, 513-530-7028
jeff.caywood@ge.com
or
The Ohio State University Fisher College of Business
Ann Hamilton, 614-292-8150
hamilton_847@fisher.osu.edu
or
Hamilton Place Strategies for the National Center for the Middle Market
Kate Bernard, 202-822-1206
kbernard@hamiltonps.com

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