Skilled Worker Shortage, Rising Costs Temper U.S. Economic Outlook

The National Association for Business Economics released their business conditions survey for the second quarter of 2017, reporting confidence in national business conditions and profit and sales growth.
The Net Rising Index—or the percentage difference between respondents reporting rising sales versus falling sales—of total capital spending rebounded to 24 in the July survey, up from a low of 17 last quarter.
“The results of the most recent NABE Business Conditions Survey show more widespread increases in sales, profit margins, hiring, and capital spending in the second quarter of 2017 than in the first quarter of the year,” said NABE President Stuart Mackintosh.
Results of the NABE survey reflect an increase of respondents citing rising employment—34%—up from 24% in their April survey.
The NRI for employment expectations of 18 remains unchanged since the previous quarter, consistent with the past four quarters.

Growth Expectations

“Materials cost pressures appear to be easing, but more firms are facing higher labor costs and difficulty in hiring, especially skilled labor,” said Mackintosh.
“Expectations for economic growth have moderated since the previous survey, but 60% of respondents still expect real GDP growth above 2% in the coming four quarters.”

Other highlights of the national survey include: 

• The NRI for expected sales rebounded to 47% in July, up three points from April. Half of respondents report sales gains at their firms, up from 45% in April.
• Forty-seven percent expect wages to rise in the next quarter, up from 44% in the previous quarter.
• Respondents report profit gains increased to 29%, after hovering around 20% in the past six surveys. The percentage seeing profits decline fell to 15% in July from 17% in April and 20% in January.

Connecticut Conditions

In CBIA's 1st Quarter Economic and Credit Availability Survey, 37% of business leaders expect improved conditions for their firms over the next three months, down from 40% the previous quarter.
Forty-seven percent expect stable conditions (compared with 39% in the fourth quarter of 2016) and 16% had a negative outlook, down from 21%.
About a quarter (26%) said they expect to increase their workforce, up from 24%, while 66% forecast no change (65%) and 8% plan reductions (11%).
"Between NABE and CBIA's most recent surveys, it's clear Connecticut's not alone in its challenges of hiring a quality workforce, improving business conditions, and moderate GDP growth," said CBIA economist Pete Gioia.
"This survey shows that nationally, firms are seeing continued growth, although the growth is moderate."
While the U.S. has reached full recovery since the recession, Connecticut continues to grapple with its own modest economic growth, exacerbated by the stalemate in state budget negotiations.
"A predictable state budget will rebuild the confidence for businesses to create investments that lead to jobs and economic growth. The two are intertwined,” says Gioia.