Even with a majority of businesses expecting a recession in 2023, many are also increasingly optimistic about their own performance, the latest JPMorgan Chase Business Leaders Outlook survey.
The survey found 61% of small businesses expect a recession this year while 72% are optimistic about their own performance, up from 67% when the survey was done in mid-2022. The survey included 1,799 businesses and was conducted Nov. 29 to Dec. 13.
“I’ve been doing this for 30-plus years and while we all acknowledge we’re either in a recession or going into a recession, the optimism by our clients is still higher than you might perceive it to be,” said Tony Maggiore, Midwest segment head, middle market banking and specialized industries at JPMorgan Chase.
A Milwaukee native, Maggiore said he was in Wisconsin in December visiting clients. The segment he helps lead covers businesses with $20 million to $500 million in revenue from a cross section of industries.
“When you actually spend time with them, their confidence level is a little higher than you might expect. Said a different way, I think they’re believing this to be maybe a shallower recession than has occurred in prior cycles,” Maggiore said.
However, he noted there is some divergence to the level of optimism with smaller firms having a more positive outlook while those larger firms with some level of international exposure are more pessimistic.
“Those clients are still positive, but less so, because they’re watching the global economy change on them pretty dramatically,” Maggiore said.
He noted the experience of navigating the Great Recession has also given some businesses more optimism heading into a potential recession.
“I feel like many of our clients, particularly industrial companies that got hit hard in ‘08, ‘09 developed a playbook and part of that playbook, to be honest, was being thoughtful with how they managed their debt, their balance sheet, and their access to liquidity,” Maggiore said. “Many of our clients have pretty decent balance sheets, so they’ve been really smart about how they manage their leverage, access to capital, some are looking to get more access to capital.”
Many of those seeking additional access to capital are focused on navigating the continued fallout of the COVID-19 pandemic. For many, consumer demand spiked just as supply chains were disrupted, making it difficult to secure parts and products. Maggiore said supply chain issues remain, but clients seem to be getting access to goods with greater frequency.
The improvement in supply chains has coincided with a slowdown in consumer demand, leaving some companies with increased inventory levels to work through.
“You’ve got companies trying to think through how to manage that inventory and be thoughtful with working capital and their balance sheet,” Maggiore said, noting that coming out of the pandemic, many businesses were spending to support a higher level of growth but they are now more focused on working capital and being more thoughtful about making investments.
Still, many companies are looking to invest in their workforce. The JPMorgan Chase outlook survey 52% of employers plan to increase staff in 2023, among midsize businesses, 67% plan to increase wages or benefits to attract and retain employees and 43% plan invest in upskilling and training. Among small businesses, 42% plan to increase wages.
Maggiore said interest the labor outlook is often dependent on industry and region and many companies are trying to do a better job of retaining employees through skills training.
“Maybe it’s cooling off a little bit, but we still see an appetite to invest in talent,” he said.
