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Hey everybody, this is Gene Marks. And welcome to another episode of The Hartford’s Small Biz Ahead podcast. Thanks for joining me. Hey, let’s talk about the economy. I mean, I get this question asked to me all the time. If the economy is so bad, why are small businesses hiring? I mean, it seems like we’re in a recession or at least some kind of a slowdown and we see the data. Let me give you some data. GDP gross domestic product has fallen for two quarters in a row and that’s what most economic experts define a recession being. Industrial production, manufacturing demand, builder in housing markets, definitely in decline. Consumer confidence is down. Small business optimism, according to the National Federation of Independent Businesses is historically low. Consumer spending is relying on personal income and personal income has been stagnant over the past two years. And to add insult to injury stock indexes, right?
They’re down like 20% since January. There was a recent report that said over 80 financial advisors are predicting that a recession is coming. One big investor that’s out there says that it’s gonna be a Whopper. By the way, have I mentioned inflation. No, I haven’t mentioned inflation. Inflation right now is still a persistent issue, producer and consumer price, the same thing with supply chains. And, most of my clients are seeing elevated costs for things like industrial chemicals and construction materials and even fertilizer. It’s bad news, you would think, right? It’s like, we’re definitely, this is the kind of stuff you would expect to see in a recession. And yet small businesses are still hiring. That same National Federation of Independent Businesses who reported a historically low confidence and optimism level.
They’re also reporting that more than 50% of all small business owners said that they have job openings that they couldn’t fill in the current period, the number of unfilled job openings, according to the NFIB and this is a 48-year study they’ve done. It’s the highest in the average. The average is usually like 22%. And now it’s at like 50%. What is going on? Who’s hiring during a recession? Does this make sense? It’s confounding a lot of economists, but I don’t think it’s like that difficult an issue to resolve. And let me give you the reasons why. For starters, this is a big country. This state of California’s gross domestic product is bigger than the UK.
It’s bigger than India. It’s bigger than France. This is just one state in this country. Texas has a larger GDP than Canada. It’s also higher than Brazil as well. The list goes on. Even the state of New York, they have a higher GDP than Canada, Korea and Russia. I mean, our GDP is still 60% larger than China’s and it’s bigger than Japan, Germany, the UK, France and Italy combined. We’re big. You can’t just say we’re in a recession guys. You have to really kind of zero down on who’s in a recession. I mean, if you’re in the construction and the real estate industry. You’re in a slow down. If you’re in financial services or even manufacturing, you’re in a slow down as well. But, there are other industries like travel, like business services, even restaurants in retail, which are certainly recovering very well.
A lot of those industries, they’re doing okay. Or like I just said, just recovering. So you just can’t make this like, overall, like the whole country is in a recession right now. We just came out of a global pandemic and there were just different industries, different regions, different areas, different types of businesses. Some are doing better than others. So that’s one, that’s why you’ve got a lot of small businesses looking for employees because they’re not doing as bad as some other colleagues in other industries. The second reason is capital. The smartest business owners I know, people who’ve been running their companies for like decades. They know that despite technology and productivity tools, their biggest asset is their people. And this isn’t a corny catch phrase.
They know that after every downturn, like the one we’re facing, well, some of us are facing now, comes an upturn, right? It’s cyclical. They realize that their future profits and long-term value depends on having the right people in place. And they learn that when they find the right person, they’re gonna jump over mountains to figure out a way to hire that person. So yeah, there’s 11 million unfilled jobs out there and it’s unlikely that this situation is gonna change, but it makes more sense because some people are doing better than others and regardless of how well or not well, some business owners are doing, if they’re smart, they’re looking for that human capital. They’ll invest in that human capital because they know that things will turn around. They’d rather put their money there than spend it on something that’s less, with less of a return.
There was a survey that was released earlier this month from PNC bank. It found that the majority of small business owners they pulled, were optimistic about the future, even despite all these challenges. And that doesn’t surprise me because we’re basically glasses, half-full people. We’re always looking to hire talent that share our same optimism and desire to succeed regardless of what today’s economy is showing. So listen, if the economy’s so bad, why are small businesses hiring? Well, I’ve just given you a few reasons why. Hopefully that helps. And frankly, I hope that you’re one of those small businesses that are looking to hire as well. My name is…
Gene Marks. You have been listening to the Small Biz Ahead podcast. Hey, if you like any advice, tips or insights to help you run your business, visit us SmallBizAhead.com or SBA.thehartford.com. Thanks for listening. I’ll be back next week with some more thoughts that I hope will help you run your business. Take care.
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