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NJBIA’s 63rd Annual Business Outlook Survey

NJ businesses look to navigate the road to resolving the hiring challenges of 2021 as cost-concerning obstacles abound.

They say a business is only as strong as its workers.

If that credo holds any water, then New Jersey businesses were weakened by a hiring crisis that continues as 2022 approaches.

Looking ahead in the New Jersey Business & Industry Association’s (NJBIA) 63rd Annual Business Survey, those businesses are indicating they’ll pay much more for staff – even if they’re challenged to afford it.

An overwhelming majority of respondents (73%) said they were challenged in finding appropriate staffing in 2021.

Those impacted businesses detailed their hiring experiences in 2021. There were: scheduled interviewees who didn’t show up (57%) or canceled their interviews (46%); candidates who said they wanted to remain unemployed to collect unemployment benefits (49%); candidates who asked to be paid off the books so they could continue to collect unemployment (27%); and candidates who said childcare challenges impacted their ability to return to work (26%).

They also explained how hiring challenges hit their bottom line: 57% said their staff was more stressed or burnt out; 51% said they lost revenue; 50% said they increased wages more than they wanted or could afford; 45% said service to their customers suffered. (See Figure 2).

Looking ahead to 2022, respondents appear conflicted when squaring hiring challenges with having to pay more to possibly resolve them.

A majority (39%) said they believe staff pay should only be commensurate with the economic value of the position and what they could afford as an employer.

However, 33% said they now believe they’ll have to pay beyond the economic value and what they can afford in order for their business to be competitive. Another 16% said they always believed they should pay beyond the value of the job to be competitive.

There were other strains noted in the survey, with 79% of respondents stating they were impacted by supply chain issues and delays more this year than in previous years. (See Figure 5).

There were also some decided bright spots throughout the survey, particularly with some businesses rebounding in profits and sales after a disastrous pandemic-plagued 2020.

However, the continued post-pandemic challenges of staffing, mandates and restrictions have caused at least some respondents to re-evaluate how long they want to keep their businesses: 37% said there is no change in their future plans due to the challenges, but 28% said, yes, they will look to sell or cease their business sooner than previously anticipated due to continued obstacles, while 31% said they’re still determining if their plans will change.

Employment

New Jersey businesses saw only pedestrian hiring levels in 2021. Only 13% increased hiring this year, while 34% said their hiring decreased.

That net negative of -21% was similar to the -23% net negative in hiring in 2020 – although 2020’s low hiring numbers likely had more to do with pandemic-related closures and restrictions than the lack of an available workforce that was so well-documented this year.

Prior to 2020, there hadn’t been a negative net hiring activity in this survey since 2012.

Looking to 2022, 33% predicted they will hire more, compared to 9%, which predicted less hiring – a +24% net positive hiring outlook. (See Figure 6).

Sales

Actual sales rebounded for New Jersey businesses in 2021, with 43% claiming an increase in sales this year – compared to the meager 19% that saw more sales in 2020 due to the pandemic.

Remarkably, the exact percentage of businesses projected the same sales next year as they forecasted for 2020. A total of 46% anticipate increased sales in 2022, compared to 23% who foresee less sales. Prior to last year, the +23% net positive outlook was the lowest since 2015.

Purchases and Prices

With the increased costs of doing business and historic losses of revenue in 2020 due to the pandemic, 55% of respondents said the prices for their products and/or services increased in 2021 (17% increased substantially, 38% increased modestly).

That 55% is compared to 31% who said they raised prices in 2020. Another 40% said their prices were kept the same this year, while only 5% said they decreased prices.

Regarding future purchasing plans, 44% are expecting to increase the dollar value of their purchases in 2022 and 18% are anticipating a decline. That’s a net positive of +26%, or 9 percentage points higher than the outlook for 2021.

In 2021, 54% of businesses said they made investments in productivity. That’s a slight increase from 50% in 2020, but still off the mark from the pre-pandemic years of 2019 (62%), 2018 (61%) and 2017 (60%).

Challenges

There was quite a shift in what businesses listed as their biggest challenges in this year’s survey.

The overall cost of doing business was listed by 28% as the most troublesome for businesses in New Jersey, breaking a four-year streak where property taxes held the unenviable top spot.

Availability of skilled labor (16%) rocketed to the No. 2 spot, while property taxes (14%) and health insurance costs (14%) rounded out the top four.

Despite its continued relative drop in importance – it used to be the top concern of business owners for years – 77% of respondents expect their health benefits costs to go up in 2022 – an increase of 6% from last year. Twenty percent anticipated those health benefit costs to rise 11% or more in 2022.

As for local property taxes, 69% expected an increase, 28% expected them to remain the same, and only 2% expected a decrease.

New Jersey’s Competitive Levels

New Jersey’s performance compared to other states was fairly similar to past years. However, New Jersey’s well-established workforce issues in 2021 changed one key metric.

Specifically, only 21% of respondents said that the quality of New Jersey’s workforce was better than other states – an 8% drop from last year and the year before. That decline could be indicative of employers forced to take less qualified workers to fill positions, or perhaps a commentary on those who chose to receive unemployment benefits rather than re-enter the workforce.

The leading competitive positive: For the second straight year, 43% rate the quality of New Jersey public schools better than other states. At protecting the environment, 21% said New Jersey does better than other states – a 2% bump from last year’s survey.

But New Jersey continues to struggle in many areas more tied directly to business. It was listed as worse than other states in taxes and fees (88%), controlling government spending (76%), controlling healthcare costs (72%), controlling labor costs (67%), and the costs of regulatory compliance (63%).

However, it’s worth noting that 4% fewer said New Jersey was worse in attracting new business and 6% fewer said the state was worse in its attitude toward business than a year ago – perhaps a nod to the recent rollout of a new state incentive program.

Wages

If there’s any category that tells the story of the impact of New Jersey’s hiring challenges, it’s in wage compensation.

There was no shortage of stories telling how small businesses reached deeper into their pockets to staff in 2021 – even if they spent more than they could afford or hired workers who were less qualified. The data in this survey backs that up.

Some 33% of employers increased pay for employees by 5% or more – compared to 12% who increased pay 5% or more in 2020. All totaled, 72% increased wages in 2021 – compared to 54% who raised pay in 2020.

Businesses expect that upward trend to continue in 2022, with 22% saying they’ll increase wages more than 5%. A year ago, only 9% said they would increase pay more than 5%.

Another 29% said they’ll raise wages between 3% and 4.9% in 2022. All totaled, 73% said they’ll increase wages in 2022 – compared to 56% who said they’d raise pay in 2021.

Profits

In the throes of a pandemic, only 20% of respondents reported net profits a year ago, compared to 62% who recorded a loss. It marked the first net negative of earnings (-42%) in this survey since the outlook for 2012.

In 2021, however, businesses rebounded at least somewhat – with 37% reporting profits and 42% taking a loss.

What hasn’t improved are businesses’ outlook for profits. Last year, there was a net positive of only 14% believing they would report a profit in 2021. In 2022, however, 38% believe they will make a profit, compared to 26% who think they will lose money. That net positive of 12% is the lowest outlook for profits since 2012, when 9% expected to be in the black.

Of that 38% hoping to be on the plus-side for 2022, 15% are only forecasting profits of 1% to 3% next year.

Cannabis

As this issue went to print, the New Jersey Cannabis Regulatory Commission had delayed issuing standards to ensure an employer’s right to maintain a drug-free workplace, and consequently, a safe workplace.

Respondents were asked for their level of confidence that they could enforce a drug-free workplace, given the legalization of recreational cannabis in New Jersey. Twenty-nine percent said they were very confident, 26% said they were somewhat confident, while 37% said they were not confident at all.

When it came to workplace safety, however, 29% said they were greatly concerned about maintaining it, while 32% said they were moderately concerned. Thirty-four percent said they were not concerned at all.

New Jersey’s Economic Climate

In 2020, the combination of the pandemic and New Jersey’s typically challenged business climate resulted in 45% of respondents saying there was a slowdown in their industry.

In 2021, however, the conditions improved. Twenty-five percent said their industry was moving from a slowdown to a recovery, while another 20% said theirs was experiencing an expansion. Only 24% said they were experiencing a slowdown – down 16% from last year – and 29% said their industry was staying about the same.

A continued reluctance for businesses to expand in New Jersey remains, however. Fifty-nine percent of respondents said they had no plans to expand, while 25% said they would expand in another state, compared to 10% that would expand in New Jersey. (See Figure 5).

As a location for new or expanded facilities, only 22% listed New Jersey as very good or good, while 30% described it as fair, and a disappointing 48% ranked it as poor.

Only 11% said they believe New Jersey has made progress over the last year in easing regulatory obstacles. That number has declined steadily from 24% in 2017.

Only 13%, however, said they needed to postpone installation of equipment or expansion of their business due to permitting delays or the state’s regulatory process.

Only 36% said they are planning to keep New Jersey as their domicile in retirement, a 4% bump from last year, but still a consistent indication of the state’s low appeal for people in their golden years.

Economic Outlooks

The business community’s perspective on the state and national economy was particularly interesting.

In 2021, most (42%) rated New Jersey’s economy as fair, while 29% described it as poor, 25% listed it as good and only 1% called it excellent. These numbers are somewhat improved from the pandemic-laden year of 2020.

But when asked how New Jersey’s economy will fare in the first six months of 2022, only 22% reported it would be better, while 44% said it would be worse.

That -22% net outlook is 10 percentage points worse than the outlook for 2021, and closer to the -28% net outlook for 2020 – when no one had even heard of COVID-19.

The biggest turn of events, however, is with the outlook for the US economy. Only 26% said the first six months of 2022 would be better, compared to 41% who said it will be worse. That’s a -15% net outlook for the national economy, likely impacted by inflation, supply chain issues and concern of increased taxes.

That’s also the lowest national net outlook for the US economy in this survey since 2012 (29%).

Regarding specific industry outlooks, 30% called for a better first six months of 2022 – 13% lower than the outlook for 2021.

About the Survey: Questions for NJBIA’s 63rd Annual Business Outlook Survey were sent to New Jersey business owners and executive staff in September 2021. The report is based on 601 valid responses. Most respondents were small businesses, with 73% employing 24 or fewer people.

To access more business news, visit NJB News Now.

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