General Business

NJBIA’s 65th Annual Business Outlook Survey

Negativity Leveling as Businesses Seek the Light

On Nov 27, 2023

A year ago, historic inflation resulted in one of the most dismal outlooks from New Jersey businesses in recent memory.

Looking at NJBIA’s 65th annual Business Outlook Survey for 2024, a slow retreat of inflation levels has shown, at the very least, a leveling off from overall negativity from New Jersey’s business community.

And if you look hard enough, there were some notable improvements to grow on.

“While it’s clear businesses are still struggling with inflation and the impacts of increased costs of running a business, it does appear that last year represented a low water mark that we’re hopefully crawling out from,” said NJBIA President and CEO Michele Siekerka.

“That’s not to say the 2024 outlook is positive overall. There are still many issues our job creators need to contend with, and newer concerns about rising energy costs. However, if our policymakers can be more proactive in improving our overall business climate, we can move the needle even more in the right direction.”

2023 was a year in which Gov. Phil Murphy signaled he will let a 2.5% Corporate Business Surtax sunset on Jan. 1, 2024. He also signed impactful legislation that will greatly improve New Jersey’s tax treatment of foreign income.

When asked if the governor and New Jersey lawmakers have done enough to address business affordability in the past 12 months, only 4% said yes, but 28% said they were unsure (See Figure 2).

Sixty-eight percent said lawmakers had not done enough to address business affordability. However, last year that number was 75%.

National factors are still at play. Eighty-nine percent of business owners or executive staff said they were substantially impacted or moderately impacted by inflation in 2023 (See Figure 3).

However, those who said they were substantially impacted by inflation decreased from 47% last year to 36% this year. Respondents only moderately impacted by inflation increased from 46% to 53%.

There were other inflationary areas where the edge notably seems to be coming off, at least somewhat. For example, 51% said they were substantially impacted by inflation for supplies and materials this year, compared to 67% who said the same last year.

Forty percent said they were substantially impacted by inflation for labor costs this year, compared to 51% last year. Those substantially impacted by fuel costs went down to 43% in 2023, from 65% a year ago.

This year’s outlook shows some decent improvement relating to staffing challenges. However, businesses took a step back in terms of profits.

Also found in this year’s mixed bag, New Jersey businesses were typically hopeful for increased sales and hiring in 2024 – but not as optimistic as a year ago.

Their outlooks on both the national and New Jersey economy for the first six months of 2024 were still not positive – but less bleak than last year when the 2023 forecast rivaled that of the Great Recession of 2008 and 2009.

Staffing

A year ago, 70% of respondents said they were challenged to find appropriate staffing – but in 2023, only 55% said they had that challenge (See Figure 1).

Most (76%) said there were not enough candidates or applicants to fill open positions, while 67% said candidates lacked the required skills or qualifications.

Further down the list, 34% said they were unable to provide the requested compensation or benefits, while another 20% reported faster-than-typical employee turnover.

Employment

New Jersey businesses continued to see an incremental rebound in hiring levels in 2023. About 23% increased hiring this year, while 18% decreased hiring.

That 5-point differential inches up from the net zero hiring found in 2022 and a notable improvement from the net negative of -21% in 2021 and -23% in hiring in 2020. Those were mostly due to the pandemic closures and their aftermath.

Prior to 2020, there had not been negative net hiring in this survey since 2012.

Looking to 2024, 28% predicted they will increase employment, compared to 7% which predicted less hiring – a +21% net positive hiring outlook (See Figure 4). Sixty-six percent said they’ll stay about the same.

Sales

Actual sales for New Jersey businesses took quite a step back in 2023, with 41% claiming an increase in sales this year. In 2022, that number was 51%.

Forty-three percent of businesses projected an increase in sales for 2024 – which is six percentage points less than the 2023 projection. (See Figure 6).

That’s compared to 26% who foresee less sales next year. Overall, that’s a +17% net positive. A year ago, that net positive outlook for sales was +28%.

Purchases and Prices

The slightly improved take on inflation in 2023 resulted in the reduction of price increases for the year.

A total of 61% said prices for their products and/or services increased in 2023 (10% increased substantially, 51% increased modestly). That’s compared to 70% who claimed an increase in products and services in 2022.

Only 3% said they decreased prices this year.

Regarding future purchasing plans, 37% are expecting to increase the dollar value of their purchases in 2024 and 20% are anticipating a decline. That’s a net positive of +17%, but 13 percentage points lower than the outlook for 2023.

In 2023, 61% of businesses said they made investments in productivity. That continues a positive trend of 55% in 2022, 54% in 2021 and 50% in 2020, and just about matches the mark from the pre-pandemic years of 2019 (62%), 2018 (61%) and 2017 (60%).

Challenges

For the third straight year, the overall cost of doing business was listed as the most troublesome problem for New Jersey businesses – with 24% listing it as tops among their Top 4.

Availability of skilled labor was second (16%) and health insurance costs and property taxes, which held the unenviable top spot from 2017 to 2020, tied for third at 14%.

Extremely consistent with recent years, 78% of respondents said they expect their health benefits costs to go up in 2024. Of those, 22% anticipated those health benefit costs to rise 11% or more in 2023.

As for local property taxes, 67% expected an increase, 31% expected them to remain the same, and only 1% expected a decrease.

NJ’s Competitive Levels

This is typically a section of the survey where the state struggles, but there are a few bright spots and positive surprises to be found (See Figure 7).

The leading competitive positive: 48% rate the quality of New Jersey public schools to be better than other states. That’s a bump from 45% last year. At protecting the environment, 24% said New Jersey does better than other states.

Another notable positive: 29% said the quality of New Jersey’s workforce was better than other states. That’s up two percentage points from last year and eight percentage points from 2021, when businesses were more apt to hire less qualified workers to fill open positions.

For the second straight year, 34% said New Jersey was a worse place to live than other states. In 2021, however, that number was 46%.

Fifteen percent said the state does a better job in promoting economic development. That’s up from 11% in 2022.

New Jersey continues to struggle in many areas tied more directly to business. It was listed as worse than other states in taxes and fees (83%) and controlling government spending (67%) – although both of those numbers are an improvement from recent years.

New Jersey is also listed as worse than other states in controlling healthcare costs (63%), controlling labor costs (60%), cost of regulatory compliance (57%), attracting new business (56%), and attitude toward business (55%).

Wages

Efforts by New Jersey employers to increase wages are continuing.

In 2023, 34% of businesses increased pay for employees by 5% or more (See Figure 8). Three years ago, during the height of pandemic-related shutdowns and restrictions, that number was only 12%.

All totaled, 78% increased wages in 2023 – just about the same as last year. In 2021, 71% of employers reported giving raises.

Despite uncertain economic outlooks nationally and in New Jersey, businesses expect that upward trend to continue in 2024, with 21% saying they’ll increase wages more than 5%.

Another 37% said they’ll raise wages between 3% and 4.9% in 2024. All totaled, 78% said they’ll increase wages in 2024, while 22% anticipate no change in wages.

Profits

From 2012 to 2019, most New Jersey businesses reported more gains than losses in this survey.

That all changed during the pandemic year of 2020, and the climb from that hole continues.

In 2023, only 32% of respondents reported profits for the year. In 2022, that number was 36%. At the same time, 44% reported a loss, compared to 40% in 2022.

This is a key reason why NJBIA uses a mantra to Trenton lawmakers that “every dollar counts” when informing on policy.

Businesses’ outlook for profits is also lukewarm at best. In 2024, only 37% believe they will make a profit, compared to 28% who anticipate losing money (See Figure 6). That net positive of 9% is the lowest outlook for profits since 2012, when 9% expected to be in the black.

Of that 37% hoping to be on the plus-side for 2024, 13% are only forecasting profits of 1% to 3%.

NJ’s Economic Climate

When respondents were asked about the current business conditions in their industry, 29% said they were experiencing a slowdown (5 percentage points more than last year), while 17% said they were experiencing an expansion.

Nearly 10% said their industry was moving from a slowdown to a recovery, while 7% said they were moving from an expansion to a slowdown. A majority (37%) said business conditions in their industry were staying the same.

For a second straight year, 58% of respondents said they had no plans to expand, while 22% said they would expand in another state, compared to 14% that would expand in New Jersey. Another 6% said they would expand another location in New Jersey and another state (See Figure 11).

As a location for new or expanded facilities, 30% listed New Jersey as very good or good, which is a solid nine percentage point increase from a year ago. Another 37% described the Garden State as fair, and 33% ranked it as poor.

Only 12% 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.

When asked if their business had postponed installation of equipment or any expansion due to delays in permitting or a regulatory process, 21% said yes.

The needle is moving in the right direction on New Jersey’s appeal for people in their golden years. Forty-four percent said they are planning to keep New Jersey as their domicile in retirement. That number is up from 39% last year and 32% two years ago.

Economic Outlooks

The economic outlooks for both New Jersey and the nation were very dismal a year ago. This year, the outlooks have definitely improved, but are still negative overall.

Forty-five percent rated New Jersey’s economy as fair and 24% listed it as poor (that’s three percentage points less in those negative categories than in 2022). Meanwhile, 28% ranked the state economy as good, compared to 25% in 2022 and 19% in 2021.

When asked how New Jersey’s economy will fare in the first six months of 2024, only 14% reported it would be better, while 45% said it would be worse (See Figure 9).

That’s a -31% net negative outlook. Not good, but better than the 36% net negative outlook a year ago (See Figure 10).

Most (70%) rated the U.S. economy as fair (42%) or poor (28%) in 2023. Again, not a number to be proud of, but better than the 81% which labeled it fair or poor in 2022.

Looking ahead, 47% said they believed the US economy would perform moderately worse (36%) or substantially worse (11%) in the first six months of 2024.

Comparatively, only 16% said the US economy would perform substantially or moderately better in the first half of next year.

That’s a -31% net outlook for the national economy for the second straight year.

Typically, low state and national economic outlooks have been countered by more positive outlooks for employers in their specific industry.

Still, the overall industry figures aren’t positive. Only 22% called for a substantially or moderately better first six months of 2024 in their industry – compared to 26% who said it would be substantially or moderately worse.

That’s the second straight year of a net negative industry outlook. Prior to that, there hadn’t been a net negative in industry outlook since 2012.

To view the full report, click below.

View Full 2024 NJBIA Business Outlook Survey

About the Survey: Questions for NJBIA’s 65th Annual Business Outlook Survey were sent to New Jersey business owners and executive staff in September and October, 2023. The report is based on 503 valid responses. Most respondents were small businesses, with 61% employing 24 or fewer people.

To access more business news, visit NJB News Now.