Local employers bullish on 2004
New MMAC survey indicates strong optimism after sluggish 4th quarter
By Steve Jagler, of SBT
The economic recovery in the second half of this year is slower in coming for Milwaukee-area businesses, but they remain steadfastly optimistic about sales increases in 2004, according to a new survey.
In a poll of 142 local companies, 70% expect sales increases next year, while only 9% foresee declines, according to the Metropolitan Milwaukee Association of Commerce (MMAC) Business Outlook Survey for the fourth quarter.
By industry, non-manufacturers are more likely to forecast 2004 sales gains than manufacturers, said Bret Mayborne, the MMAC’s economic research director.
"There’s a pretty strong positive impression toward the coming calendar year. That’s a reasonably strong number," Mayborne said.
While local businesses are forecasting a rosy 2004, the fourth quarter of this year is not shaping up to be quite as bright as they had hoped.
Fifty percent of the companies surveyed expect sales increases in the fourth quarter compared with the same period a year ago, down from the 65% that predicted sales gains in the third quarter.
"The overall numbers didn’t improve much in the fourth quarter, in general, which I think says to me that things aren’t really going to get better until the next calendar year," Mayborne said.
A sampling of reactions from members of the MMAC’s Council of Small Business Executives echoes the results of the new economic outlook survey.
"The pendulum is on the upswing for us," said Charles Engberg, principal at Engberg Anderson Design Partnership, Milwaukee. "It looks like the fourth quarter is going to be good. The last three quarters were pretty flat. We’re in a relatively good position, and I think we’ve weathered the storm as good as anyone."
Ironically, the federal tax cut enacted by President George W. Bush earlier this year has a negative impact on architectural and construction companies that provide services to public buildings, at least in the short run, Engberg said.
"It may be good for the consumer, but I don’t think it’s been good for businesses and municipalities that depend on federal funding to states and municipalities – like funding for libraries," Engberg said.
Engberg’s firm is beginning the design work for the $40 million historic renovation of Milwaukee’s City Hall.
Michael Herro, chief executive officer and owner of Geo-Synthetics, a Waukesha-based supplier and installer of environmental construction products, also is optimistic about 2004.
"I would agree. At my CEO Roundtable, when we discussed the current and next year, everybody seemed optimistic," Herro said. "Our year this year is definitely stronger than last, and we’re going to expect a bit more of a pickup next year, maybe 6 to 8% growth in sales. I just think the market in general is improving."
Although local companies expect rising sales in 2004, they’ll also face familiar increases in employee health care benefit costs, according to Richard Blomquist, president and CEO of Milwaukee-based Blomquist Benefits.
"The cost of existing benefits is high, and companies are struggling just to maintain those existing benefits," he said.
Blomquist notes the proliferation of cardiac care facilities in southeastern Wisconsin.
"We’re going from four cardiac systems to 12. That doesn’t make a lot of sense to me. That’s overkill. Competition doesn’t occur in the health care market," he said.
Still, Blomquist senses overall optimism from the employers for whom he provides consultation.
Because sales have been more sluggish to rebound than anticipated this year, the revitalization of the state’s employment scenario has been correspondingly stubborn to improve.
Wisconsin’s unemployment rate for July was 5.5%, up from 5.3% in the same month last year, according to the most recent data from the Wisconsin Department of Workforce Development.
In the Milwaukee-Waukesha market, the unemployment rate for July grew to 6.1%, up from 5.8% a year ago. Meanwhile, Racine’s unemployment rate skyrocketed to 7.6%, up from 7.1%.
The national unemployment rate for July was 6.3%, up from 5.9% last July.
Job growth has traditionally lagged behind sales growth, Mayborne said.
"The implication is that the job thing is the last thing to push forward. The job improvement will come later on," Mayborne said.
Although sales growth is creeping forward, the weak employment trends have generated little upward pressure on wages and salaries, Mayborne said. In the fourth quarter, local businesses forecast an average increase in per-employee wages and salaries over the next 12 months of 2%, down slightly from the 2.1% they predicted in both the second and third quarters.
The MMAC’s survey respondents include both large and small companies, with a combined employment of 60,100 people.
Sept. 19, 2003 Small Business Times, Milwaukee