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Sunday, 20 December 2015 23:35

Business leaders statewide remain ‘cautiously optimistic’ for 2016

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For Natura Architectural Consulting LLC, business this year has exceeded expectations.

Revenues are up at the Grand Rapids firm that had surpassed its growth goals for 2015 as of mid-November, and Natura continues to bring aboard new clients, said owner Nate Gillette.

He expects business to stay strong for the foreseeable future.

“We’re pretty optimistic about what’s happening,” said Gillette, whose nearly two-year-old firm consults with lenders and real estate developers to assess the condition of properties. “As far as I can see, with as much as we have going on, there’s nothing that’s slowing anything down for the next nine months or so.”

Gillette’s view follows that of many of the 400 business owners across Michigan who responded to a sentiment survey commissioned in mid-November by MiBiz and Crain’s Detroit Business and sponsored by the law firm Honigman Miller Schwartz and Cohn LLP.

The sentiment survey generally found widespread satisfaction among respondents about the state’s direction and expectations that the Michigan economy will either hold steady or improve over the next year.

“Cautiously optimistic would be a good way to characterize” the mood of survey respondents, said John Cavanagh, a partner at Lansing-based polling firm Epic/MRA, which conducted the survey in mid-November that included 200 subscribers each from MiBiz and Crain’s Detroit Business.

In analyzing the data from the sentiment survey, Cavanagh saw respondents indicating they had an overall happy mood.

“My business isn’t going great guns, but I’m happy. I’m making money and I don’t see a downturn coming for at least another year and a half, if then,” he said of respondents’ reactions.

That finding follows steady improvements in the mood that business owners offered in sentiment surveys Epic/MRA conducted in the last year and a half for clients around the state, Cavanagh said.

“The cautiously optimistic view these respondents have in the economy and prospects for their personal and professional wellbeing continues and has gotten incrementally stronger over the past 18 months,” he said.

Statewide, 57 percent of the 400 survey respondents expect the state’s economy to improve in the next year and 35 percent see it staying the same. Just 6 percent believe it will worsen.

In West Michigan, 52 percent of respondents expect the state economy to improve next year, 39 percent believe it will stay the same, and only 7 percent expect things to get worse.

“Everything is humming right now,” said Greg Metz, a partner at Lott3Metz Architecture LLC in Grand Rapids.

Metz reports higher revenue and customer contacts for his firm as well, “and I just see it continuing.”

“There just doesn’t seem to be anything on the horizon that will change that, barring anything catastrophic,” Metz told MiBiz. “West Michigan has figured it out.”

In Southeast Michigan, 62 percent of business owners participating in the survey expect Michigan’s economy to improve and 39 percent expect it to stay the same in 2016. Only 5 percent believe things will worsen economically.

Sixty percent of statewide respondents are “somewhat satisfied” with the present state of Michigan’s economy and how it affects their business and 15 percent are “very satisfied.”

The results to the question of economic satisfaction and what Cavanagh calls “just a general contentment” are fairly even across the state and varied only slightly between West Michigan and Southeast Michigan.

“There’s virtually no difference,” Cavanagh said. “And among those that are dissatisfied, it’s not really that strong. It means they are somewhat dissatisfied.”

In West Michigan, 12 percent of survey respondents were “very satisfied” with the state economy and 67 percent were “somewhat satisfied,” while 63 percent of Southeast Michigan respondents said they were “somewhat satisfied” and 17 percent were “very satisfied.”

Business owners on either side of the state were also fairly aligned in their view of when their business fortunes may run out of steam and move downward. Thirteen percent of respondents statewide expect a downturn within the next year, 12 percent see it in 13 to 18 months, 22 percent believe it will happen between 19 months and two years from now, and 38 percent don’t see a downturn in their industry in the foreseeable future.

The relative close views of business owners in West Michigan and Southeast Michigan stood out to Phil Torrence, an M&A attorney at the Kalamazoo office of Honigman, the law firm that sponsored the survey. Torrence was impressed that survey respondents in Southeast Michigan are as “bullish on their economy as we are here on the west side, in fact possibly even more so.”

“Clients that I deal with on the east side of the state seem to be more optimistic about the future than the west siders,” he said. “It has a long way to go, but you cannot deny the absolute change that is occurring in Detroit. For so long, Detroit has struggled. Among many, many other things, clearly, this shows it’s back in a very good way, and that’s good for the state as a whole.”

“You can’t have an unhealthy Detroit with a robust west side and expect the state to do well as a whole,” Torrence added. “It’s not going to work.”


HIRING OUTLOOK

The relative upbeat perspective on Michigan’s economy showed in the hiring outlook for next year. Thirty-five percent of statewide respondents indicated they would add jobs in 2016, while 52 percent intend to maintain staffing levels.

Nearly half of all respondents also plan to increase wages next year and 37 percent will maintain present pay levels. In West Michigan, 53 percent of business owners answering the survey said they will raise pay for employees.

Amid the improvements in Southeast Michigan and the general optimism across the state, however, there remain lingering concerns.

Asked to rank their biggest two concerns, 12 percent of respondents said they still worry about the economy despite the improvements, and 10 percent worry about a lack of customers.

While those are two typical issues “we’d expect to see,” the Epic/MRA sentiment surveys shows talent as a concern rising out of the recession, Cavanagh said. Of the statewide respondents who identified a talent gap as a problem for their businesses, 16 percent said it’s becoming a “much bigger problem” and 29 percent reported it’s a “somewhat bigger problem.”

In West Michigan, the talent gap was listed as a “much bigger problem” by 20 percent and a “somewhat bigger problem” by 25 percent of respondents.

“It’s a big deal for our economy,” said Bill Guest, CEO and chief solutions officer at Metrics Reporting Inc. in Grand Rapids, which works with clients on human resources selection. “It’s pervasive enough that every sector is feeling a lot of pain right now.”

Guest was among survey respondents who listed the talent gap as getting much bigger. He cited data from the U.S. Bureau of Labor Statistics that show at the end of October, there were 5.4 million job openings across the nation. The problem is the ability to get people properly trained for the job skills they need, Guest said.

Gov. Snyder has placed a great emphasis on job training and workforce development during his second term, and economic development efforts for years have focused greater attention to the issue, he said.

Those efforts need to focus “harder and smarter” on the issue, particularly by helping employers better articulate to prospective talent exactly what they need, Guest said.

“Economic development has historically and appropriately focused on bringing jobs to a region,” he said. “Well, bringing another employer here doesn’t do much if the current employers can’t fill their jobs. All that’s going to do is bring more competition for the jobs. The real critical shortage isn’t the job openings. The critical need is how do we train people to fill the jobs that exist.

“If we become known as the region that’s able to train people to fill jobs and our employers find it easier to fill jobs in West Michigan, that will actually draw employers.”


POLITICAL LANDSCAPE

Away from the business issues and concerns, respondents to the MiBiz/Crain’s sentiment survey give mixed marks to the present political leadership in Lansing.

Gov. Snyder received high marks across the state for his job performance, with 71 percent of respondents saying he’s doing a good or excellent job. The governor received a 74 percent approval rating in West Michigan and 68 percent in Southeast Michigan.

Cavanagh calls the governor’s approval ratings “phenomenal.”

“But what are you comparing him against — an unpopular president and what some would argue would be a dysfunctional Legislature?” said Cavanagh, noting the low approval ratings for the state Legislature and President Barack Obama indicated in the survey.

The president had an approval rating of just 30 percent statewide — 23 percent in West Michigan and 37 percent in Southeast Michigan.

The state Legislature fared even worse. Just 25 percent of statewide respondents rated lawmakers as doing a good job and 66 percent gave them a fair-to-poor rating. Nobody on either side of the state gave the Legislature an “excellent” rating.

Lawmakers received a 29 percent approval rating in West Michigan. Southeast Michigan respondents had a dimmer view of the Legislature, giving lawmakers in Lansing an approval rating of only 21 percent.

Cavanagh attributes the low approval rating for the Legislature to two issues that dominated news out of Lansing in the months prior to when the survey was conducted: the prolonged debate over a package to increase funding to repair the state’s deteriorating roads and the scandal involving former Republican state Reps. Cindy Gamrat and Todd Courser.

Fifty-five percent of respondents on both sides of Michigan approve of the roads plan and 35 percent disapprove.

The approval for the roads package may simply reflect the years it took to resolve “what everybody recognizes as a serious need” and could indicate people were generally tired of the issue and wanted it resolved, Cavanagh said. Of those who disapprove of the roads package, 23 percent statewide cited the increased fees and taxes.


BUSINESS CLIMATE

Elsewhere in the survey, 38 percent of residents said state taxes are still too high in Michigan, despite the changes made early in Gov. Snyder’s first term to eliminate the Michigan Business Tax and replace it with a 6-percent corporate income tax, and the phased-in repeal of the personal property tax. Half of construction companies said state taxes are too high, as did 52 percent of businesses involved in real estate and 40 percent of manufacturers.

Forty-three percent said state taxes were “about right” and 2 percent said they were too low.

Cavanagh noted that surveys Epic/MRA conducts for public school districts planning a bond issue or millage increase typically find that 20 to 25 percent of people always say that their taxes are too high.

Compared to the rest of the nation, Michigan ranks 13th this year in its overall business tax climate, according to an annual report published each November by the Washington, D.C.,-based Tax Foundation. In specific areas, the state is 11th in the corporate income tax, 15th in the individual tax rate, 7th in the state sales tax, 48th in its unemployment tax, and 26th for property taxes.

Michigan’s business climate was rated as excellent-to-good by 41 percent of business owners responding to the MiBiz/Crain’s survey and fair-to-poor by 48 percent. In West Michigan, 37 percent gave the state’s business climate an excellent-to-good rating and 54 percent rated it as good to poor.

Architect Metz in Grand Rapids agreed the state business climate surely has improved of late, but said he believes it could still be better.

“We’re certainly not super-competitive,” said Metz, whose overall present optimism about the economy comes “despite our Legislature.”


MEDC EFFECTIVENESS

Readers of MiBiz and Crain’s Detroit Business gave a “mixed bag” of responses when asked about the Michigan Economic Development Corp., which had its funding for fiscal year 2016 cut by 27 percent, forcing the layoff of 65 staff members.

Just 12 percent of respondents in both West Michigan and Southeast Michigan believe the funding cut will have a major negative impact on the state’s overall economic development future. Meanwhile, 24 percent see it as important but not having a major impact. Thirty-five percent statewide see the MEDC’s funding cut as having only a minor impact and 15 percent said it will have no impact at all.

While the results reflect the personal perspective of survey respondents, they are not good for the MEDC, Cavanagh said.

“You have a pretty strong majority who don’t see the MEDC as being a benefit to them,” he said.

That’s worrisome for Metz, who regularly sees the work the MEDC does through incentives provided to commercial real estate projects, redevelopments and the rehabilitation of old facilities in which his firm is involved.

Without those incentives, many of those projects would not proceed, Metz said.

“A lot of projects are getting done because of the MEDC,” he said. “It’s one of the better things we have going right now.”

Read 2779 times Last modified on Monday, 28 December 2015 10:28
Mark Sanchez

Senior Writer

[email protected]

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