4Q 2013 Middle Market Indicator

The fourth quarter of 2013 showed continued revenue and employment growth in the U.S. middle market, although at a slower pace that could continue throughout 2014. Confidence has improved in the global economy and leveled off for both the U.S. and local outlook. In terms of hiring, a majority of middle market leaders say they are holding back and instead putting capital to work because of lack of clarity surrounding federal regulations.


Key Insights

In 2013, more than half of middle market companies reported improved company performance. Overall there was a slight decline in the number of mid-market companies reporting improved performance, 56% down from 62% in the last two quarters of 2012. In the fourth quarter revenue grew at 5.0%, marking the slowest rate of increase over the past four quarters, and down from 7.0% when companies were rebounding from the recession. However, middle market results are outperforming the broader market by a wide margin, underscoring the middle market's stability and role as driver of the U.S. economy.

Middle market companies expect improved revenue growth in 2014, with 57% projecting revenue growth, level to the 60% expected last quarter. These companies expect increases of 4.3%, down from 5.3% last year and roughly the same as the third-quarter forecast.

Employment growth stabilizes

In the fourth quarter, 39% of middle market companies said they added workers, consistent with results over the previous four quarters. Companies reported mean job growth of 2.5%, down from 2.7% last year, but up from 2.2% during the first quarter. Looking ahead, the middle market expects 2.2% job growth in 2014.

Confidence landscape has shifted

The confidence outlook has changed noticeably in the past year with increased optimism in the global economy and a leveling-off of confidence in both the local and U.S. economies. only 16% of respondents reported no confidence in the global economy in the fourth quarter, less than half of the 34% last year.

Capital investment and hiring restrained by policy uncertainty

A majority of middle market companies said that uncertainty around government policies is impeding their ability to grow and their willingness to hire and spend. In the quarter, 58% of all middle market companies say that federal policy uncertainty has impacted their business planning, with 63% saying they are less likely to hire new workers and more likely to trim expenses, and 56% saying they are less likely to make capital investments.

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