Local employers show timid signs of hope

The southeastern Wisconsin economy may see a turning point in its recovery in the fourth quarter, with year-over-year job growth for the first time in more than two years, according to the latest Business Outlook Survey by the Metropolitan Milwaukee Association of Commerce.

Still, employers’ expectations for future growth appear to be cooling off, said Bret Mayborne, the MMAC’s economic research director.

“It is likely that the metro area will see year-over-year job growth in 2010’s fourth quarter after 28 consecutive months of decline, but in the next year or so the trend of recovery may be as much sideways as it is upward,” Mayborne said.

“The job situation in the metro area has improved considerably over the course of 2010. While year-over-year job losses have continued, the rate of decline has fallen from a drop of 4.6 percent in January to August’s 0.3-percen decline. This trend suggests that renewed year-over-year employment gains for the metro area may be on the near-term horizon,” Mayborne said. “Results of the business outlook survey suggest that an improving employment situation is likely to continue through the remainder of 2010. Employers expecting fourth-quarter job increases vs. year-ago levels (34 percent) outnumber those projecting declines (22 percent), with the largest number (44 percent) seeing no change. Nonetheless, like sales forecasts, businesses are less confident of job gains now than they were in 2010’s third quarter, when 43 percent predicted year-over-year job gains.”

Overall, Mayborne says employers are forecasting a “tepid” fourth quarter.

A majority of companies surveyed see sales and profit gains in 2010’s fourth quarter, and those surveyed are more likely to predict job gains than losses, but in each case the level of optimism was less than that expressed in the third quarter survey.

“Quarterly business expectations dipped a bit for the first time in one and one-half years,” Mayborne said. “While current expectations probably do not foreshadow a double-dip recession, they likely suggest near-term sluggishness in the pace of the economic recovery.”

Fifty-nine percent of all businesses surveyed see real sales gains in 2010’s fourth quarter (vs. year-ago levels), down from the 66 percent who forecast third-quarter sales increases. Seventeen percent predict fourth-quarter sales declines (vs. 2009’s fourth quarter) while 24 percent expect no change. Optimism toward quarterly sales increases fell for the first time in six quarters (since 2009’s second quarter).

Manufacturers were more likely to predict sales gains than non-manufacturers. Sixty-seven percent of manufacturers see fourth-quarter sales gains (vs. 2009’s fourth quarter), while 54 percent of non-manufacturers see such increases.

Fifty-six percent of all surveyed businesses predict fourth-quarter profit gains (vs. 2009’s fourth quarter), lower than the 62 percent who saw third-quarter increases (vs. year-ago levels). Twenty-five percent see profit declines in 2010’s fourth-quarter and 19 percent see no change.

Wage and salary expectations remain at low levels. Employers project an average annual increase of 1.7 percent in per employee wages and salaries over the next 12 months. The forecast average is down from the 2.1 percent rise projected three months ago.

The Business Outlook Survey contains responses from 145 Milwaukee-area firms, both large and small, employing more than 54,100 people.

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