Local businesses foresee revenue increases in 3rd quarter

Local businesses foresee revenue increases in 3rd quarter

The worst is behind us." That’s becoming the consensus catch phrase among southeastern Wisconsin’s business executives as they ponder the region’s economy in the second half of 2003.
So many of the numbers add up to a sprawling conclusion that after three years of recession, the southeastern Wisconsin economy has bottomed out and is now beginning the climb upward.
It will be a long, deliberate climb, but at least it has begun. Consider:
— 58% of employers surveyed by the Metropolitan Milwaukee Area Chamber of Commerce (MMAC) expect sales growth in the third quarter, compared with the previous period.
— 65% of those employers expect sales growth in the third quarter, compared with the same period a year earlier.
— Statewide employment growth is expected to accelerate from 1% in the third quarter to 2.5% in the fourth quarter and 3.1% in the first quarter of 2004, according to the Wisconsin Department of Revenue.
— Statewide personal income growth is projected for a 3.6% gain in 2003, followed by a 5.1% gain in 2004, the Department of Revenue reports.
— 33% of the companies interviewed by Manpower Inc. in Milwaukee, Ozaukee and Washington counties expect to hire more employees, while only 14% intend to reduce their workforce.
— The monthly total number of new incorporations in the state jumped from 430 in February to 567 in April, according to the Department of Workforce Development.

Take those numbers and then account for some underlying factors, such as low inflation, low interest rates, frozen tax rates and a booming housing market, and many local economic analysts are concluding the rebound has begun.
"Optimism on the part of Milwaukee-area businesses toward sales growth is as high as it has been in recent memory," said Bret Mayborne, the MMAC’s economic research director. "The fact that 65% of the local businesses expect quarterly sales increases on a year-to-year basis basically says that things in the sales realm are taking a pretty significant jump from recent quarters."
"We should be set up for improvement – pretty dramatic improvement -in the latter part of this year," said Amy Croen, co-president and principal of Geneva Capital Management Ltd., a downtown Milwaukee independent investment advisory company. (See related Q&A on Page 18.)
Aside from the macroeconomic statistics, a growing mass of anecdotal evidence also suggests southeastern Wisconsin is turning the corner.
David Kern, a partner who specializes in labor and employment law at the Quarles & Brady law firm in Milwaukee, says his caseload involving plant closings is creeping to a halt after a couple of hectic years.
"With respect to the issue of the economic recovery, I have seen a definite change in the mix of our work. Last year at this time, I was spending approximately 50% of my time advising clients on plant closings, mass layoffs, group severance programs, voluntary early retirement programs and other downsizing issues, as employers grappled with declining sales volumes and the like," Kern said. "At this point, I would estimate that the volume of that work has dropped to 10% or less. There is much more of an emphasis on day-to-day employment issues.
"I also negotiate a fair number of labor agreements, and I see a similar trend. Although bargaining is always very company and industry specific, and skyrocketing health insurance costs seem to predominate in every deal, there is more cautious optimism and a willingness to consider wage enhancement than there was at this time last year. My clients seem to echo what you’ve heard – that the worst is behind us," Kern said.
Even the – gulp – technology sector seems to be picking up steam.
Tim Dodge, president of Hanson Dodge, a design and marketing firm that specializes in electronic image branding, says American companies are finally getting closer to reinvesting in things like their technology, their market research and their branding.
"You’d have to come to that conclusion, wouldn’t you?" Dodge said. "Call it pent-up demand, call it people just getting back to doing business again."
Dodge is so confident in the rebound that his company has partnered with two other firms, Purple Onion Entertainment and Whole Hog Productions, to build the Center for Creative Business in a former antique market being renovated at 318 N. Water St. in Milwaukee’s Historic Third Ward.
However, the MMAC’s most recent survey says that although most southeastern Wisconsin companies are projecting sales growth in the second half of the year, they are still reluctant to predict gains in profits or to add to their workforce.
"There’s kind of a ‘show me first’ attitude, even though sales are up," Mayborne said. "That will be borne out in future quarters, hopefully. There’s still some tepidness out there. There’s a hesitation to get too optimistic about profits."
Indeed, the path to full recovery won’t be free of speed bumps, the largest of which continues to be the skyrocketing costs of health care.
Nearly 70% of the employers interviewed in the Wisconsin Manufacturers & Commerce (WMC) 2003 Outlook Survey, published in June, have sustained per-employee health care coverage cost increases of 11% to 20%. Another 18.2% have seen their costs spike 21% to 30%.
Curiously, the WMC survey didn’t even list health care costs among the 10 answer options for respondents to questions regarding the top policy issue facing Wisconsin and the top business concern facing their companies. Of course, several members of WMC’s board of directors represent the health care and insurance industries.
With no answers in sight, few employers expect any relief from their exploding employee health care insurance premiums. Neither the state nor the federal government has followed through on pledges to create small-business employer pools to reduce premium costs.
Further, neither Republicans nor Democrats have proposed a feasible health care reform plan to deal with the problems.
Other complications in the economy could include renewed terrorist attacks and global tensions, as well as the possibility that Midwest Airlines could file for bankruptcy.

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July 11, 2003 Small Business Times, Milwaukee

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