Milwaukee employers optimistic about 2nd quarter

Continuing improvement is expected in the southeastern Wisconsin economy in the second quarter, according to the latest Business Outlook Survey conducted by the Metropolitan Milwaukee Association of Commerce (MMAC).

Seventy-three percent of businesses surveyed foresee sales increases in the second quarter and nearly half expect job gains for the new quarter.

“Survey results suggest that the economic recovery has reached firmer ground. For the second consecutive quarter, business expectations reflect those normally seen in a typical growth environment,” said Bret Mayborne, the MMAC’s economic research director. “The current levels of optimism stand in marked contrast to the weak-to-tepid forecasts given by metro area businesses stretching from 2007’s fourth quarter to 2010’s fourth quarter.”

Local manufacturers are particularly optimistic on future sales levels. Eighty-five percent of local manufacturers surveyed foresee improved real sales levels in the second quarter, 20 percentage points higher than the level of optimism expressed by non-manufacturers (65 percent foresee sales increases).

“Results from the second-quarter survey suggest that the manufacturing sector is playing a leading role in jumpstarting the metro area’s economic recovery. Manufacturers have posted higher expectations toward both future sales and employment levels than for employers overall. This is atypical of past economic recoveries where manufacturing has been late to economic growth,” Mayborne said. “If there is any qualification to the survey results, it could be what it implies regarding the speed of the recovery. While the results certainly suggest improvement, they are not at the top end of optimism historically. The hope is that this optimism would build as the year moves forward.”

The 73 percent predicting a quarterly sales increase is up modestly from the 71 percent who forecast first-quarter sales gains (vs. 2010’s first quarter) three months ago. This marks back-to-back quarters in which positive quarterly sales expectations have exceeded 70 percent, the first such occurrence since the beginning of the recession (2007’s fourth quarter).

By size, large employers (100 or more employees) are somewhat more likely to forecast second-quarter sales gains than small companies, as 79 percent of large employers see gains vs. 68 percent for small employers.

Profit forecasts held at a healthy level for the quarter. Sixty-two percent of all Milwaukee area businesses see higher profits in the second quarter (vs. year-ago levels), matching the percentage who forecast first-quarter profit gains. Currently, only 14 percent predict profit declines while 24 percent see no change.

Revisions to metro area employment numbers indicate that year-over-year job growth in the metro area restarted in July 2010, after 26 consecutive months of decline. Through February, (latest available), metro job totals have now posted eight consecutive months of year-over-year employment growth, growing at a 2.1-percent pace in February.

This employment upturn is expected to continue through the second quarter. Businesses foreseeing second-quarter job gains for their local operations (48 percent) outnumber those expecting declines (7 percent) by nearly a seven-to-one margin. Forty-five percent see no change in employment levels.

Sales projections for 2011 are also bright. Currently, 74 percent of businesses surveyed see real sales gains for calendar year 2011, only 9 percent see declines while 17 percent see no change. The percentage predicting sales gains is down slightly from the 76 percent who forecast 2011 increases at the beginning of the year.

The Business Outlook Survey, conducted by the MMAC, contains responses from 122 Milwaukee area firms, both large and small, employing more than 72,400 people.

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Steve Jagler
Steve Jagler, former BizTimes Milwaukee editor.