How did Main Street fare in July?
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Major Avenue continues to be resilient in spite of the increasingly long list of difficulties and countercurrents it should contend with. SMB proprietors and staff members have an progressively extensive checklist of issues to contend with: Client costs enhanced at the optimum price in 40 a long time in June. On the work and using the services of fronts, some of the biggest and most well known world-wide firms introduced layoffs, choosing freezes, or employing slowdowns. Consumer self-confidence and sentiment are reduce.
Professionals also now estimate a increased chance of a recession inside the upcoming calendar year given the affect of inflation on company earnings and Fed policy imperatives. Wall Road analysts continue on to cut down earnings and benchmark index estimates. Bellwether firms these types of as Walmart have reduced their earnings estimates citing slowing consumer retail product sales. Jobless promises go on to rise and are now at the greatest weekly level given that November 2021. Optimistic news features slipping commodity selling prices, such as for oil lessen mortgage and interest rates and a nevertheless strong using the services of marketplace.
Our possess critical Main Avenue Well being Metrics for July unveiled some softening in hours labored (a reduction of around 12%) and staff members functioning relative to June. Even so, these metrics keep on being greater relative to January of 2022 and compare favorably to the pre-pandemic period.
Principal Street Overall health Metrics
(Rolling 7-day ordinary relative to Jan. 2022)
Nominal regular hourly wages are up nearly 10% because the beginning of 2021. Regular (nominal) hourly wages in mid-June remained close to 10% over estimates from January of 2021. Evidence from mid-July indicates that wage inflation greater reasonably relative to June and has not held up with inflation.
Per cent alter in nominal typical hourly wages and CPI Paying for Ability of the Customer Dollar relative to January 2021 baseline1
1. Nominal average hourly wage changes and the (every month) CPI for all City Buyers: Buying Electricity of the Consumer Dollar in U.S. City Average (non-seasonally adjusted) calculated relative to a January 2021 baseline. Resources: Homebase information, U.S. BLS.
Most employees are involved about a economic downturn there is some variation centered on political orientation. Based on a pulse study of close to 700 staff performed in mid-July, we discovered that staff members are possibly really (32%) or fairly (47%) worried about a recession. There is, nonetheless, some variation (from an overall significant baseline) dependent on political orientation. Virtually 90% of those who establish as either very liberal or liberal are possibly incredibly or relatively worried about a recession. For moderates, the determine is 82.5% and for conservatives it is 81.4%. Individuals who preferred not to detect their political orientation ended up comparatively fewer involved about a recession at a still higher 76%. One particular attainable explanation is the perceived impact the economy may perhaps have on the November elections.
Study concern: Are you worried about a recession?
Resource: Homebase Employee Pulse Study. LR-Chi Square = 24.5, p < 0.004
Maybe my current job is not so bad? Macro-economic and social forces have changed how employees regard their current jobs and alternative job options. 49% of employees surveyed in July indicated they do not intend to search for a new job in the next one to two years. This compares with 41% in January of 2022 and 39% in November 2021.
Survey question: Do you intend to look for a new job in the next 12-24 months?
Source: Homebase Employee Pulse Surveys. Ns = November (2324), January (548), June (1767), July (710).
The cost of gas is the item most impacted by inflation. Food costs and rent or mortgage round out the top three categories. Consistent with CPI data, the cost of gas was cited most frequently (50%) as the category most impacted by inflation. The cost of food cooked in one’s home was ranked first by approximately 20% of employees, followed by rent or mortgage costs (approximately 13%). As one employee put it:
“I can’t afford anything. Anything. Prices are so high and I was barely scraping by as it was.”
Survey question: Which of your monthly costs have been most impacted by inflation?
Source: Homebase Employee Pulse Survey.
Most employees are concerned about a recession they are also taking steps to prepare for one. To prepare for a possible recession, employees are building up savings (54%) and paying down debt (17%). Interestingly, however, only 5% are cutting down on entertainment (e.g., going to movies, amusement parks), eating out at restaurants (3%), or travel (<1%). These findings are consistent with recent reports indicating continued consumer strength in these categories. Finally, less than one percent of employees indicate that they are looking to switch to lower priced products/services to prepare for a recession.
Survey question: Which steps, if any, are you taking to prepare for a recession?
Source: Homebase Employee Pulse Survey.
Much like their hourly employees, most owners are concerned about a recession. A July pulse survey of approximately five hundred owners reveals the ubiquity of recession fears.
Survey question: Are you worried about a recession?
Source: Homebase Employee Pulse Survey.
Given the ubiquity of recession fears, most owners do not plan on opening new locations. Results from July 2022 resemble results from January 2022 when Omicron impacted business (planning). From June to July 2022, the percentage of owners who intend to open a new location in the next one to two years decreased by approximately 3 percentage points with a corresponding increase in the percentage of owners who indicated they do not intend on opening a new location in the corresponding period.
Survey question: Do you intend to open a new location of your business in the next one to two years?
Source: Homebase Employee Pulse Survey.
Owners’ hiring intentions for the next one to two years are changing. However, the vast majority of owners intend to hire and the overall average implies a headcount increase of 30%. Most small business owners intend to hire additional employees in the next one to two years. However, since January of 2022, a pattern is emerging where an increasing percentage of owners are either planning on making no additional hires or are planning on significantly increasing headcount. The percentage of owners who now intend to make no additional hires increased more than 37% since June and nearly tripled relative to January. On the other hand, approximately 21% of owners plan on hiring eleven or more employees.
Survey question: How many additional workers do you intend on hiring in the next one to two years?
Source: Homebase Employee Pulse Survey.
Twenty-seven percent of owners ranked the price of raw ingredients or intermediate goods as the cost that has been most impacted by inflation. The cost of gas was a close second (25%), followed by employee salary costs (18%). The cost of electricity (11%) and construction materials (6%) round out the top five. As one owner put it:
“Increase in prices for raw ingredients, supply chain issues and shortages of many items, combined with the now due payments will have a large negative impact on my business.”
Survey question: Which of your monthly costs have been most impacted by inflation?
Source: Homebase Employee Pulse Survey.
Most owners are concerned about a recession they are also taking steps to prepare for one. To prepare for a possible recession, owners are taking similar steps as their employees: First, they are building up savings (39%). Second, they are paying down debt (16%). Third, they are reducing employee work shifts (9%). Less than 0.5% of owners are preemptively laying off employees to prepare for a possible recession.
