Managing Your Business
Here Are Three Economic Trends Business Owners Should Know About
This content originally appeared on Vox.com.
As a business owner, understanding changes in the economic climate can help you plan for the future. And Michael Feroli, the chief U.S. economist for J.P. Morgan, currently sees three trends that he thinks will impact your businesses: a falling unemployment rate, a strong dollar and low energy prices.
"The unemployment rate was as high as 10 percent a couple years ago and recently came down to 5 percent," he says. "That's significant, and wage growth has moved from 2 to 2.5 percent, so it's getting harder to retain employees, who are jumping ship more and more as they get more confidence in the labor market."
And Feroli suggests that may mean business owners will have to consider incentives to keep top talent.
"It's no longer a given that [employees] are going to be afraid of a very weak labor market," he says.
This is a reality that resonates with Aron Susman. As co-founder of The Square Foot — which helps businesses find and lease office space — Susman looks nostalgically to the days, not too long ago, when he could choose from a unusually deep pool of highly qualified candidates when hiring.
"Things have changed dramatically," he says.
The rebounding economy has not only created new positions within existing companies, but has led to more investments flowing into new ventures, causing a shortage in qualified candidates, Susman says.
"It's become incredibly difficult to find the perfect fit," he says. "So we need to be much more flexible in our search, and we need to dedicate more time on training the right individual, who may not have the exact experience we're looking for."
How Lower Energy Prices May Energize Consumers
While the benefits of a lower unemployment rate are few for business owners, the benefits of lower energy prices are clearer.
"We've seen in the last year that consumer spending has been supported by declining energy prices," says Feroli, noting that oil prices are down 70 percent in the last 18 months. "And when energy prices go down, consumers have more money in their pocket to spend, and for businesses that are consumer oriented, this is a good thing."
And nothing pleases business owners more than when they, and their customers, have more money in their pockets. Count Joey Rubenstein among them. As the owner of The Casting Frontier, a company that helps its 800,000 members find auditions for films and commercials, the benefits of increased consumer spending are felt in more than one way.
"When we have more money in our pocket, we're able to buy more supplies, invest more in infrastructure, and hire more people," he says. "We can scale our business easier. And when our customers have more money in their pockets, they can afford a higher tiered subscription to our service, allowing them to find more opportunities as well. So it works for everybody."
Consumers are also reaping the benefits of a strong dollar. The dollar index — which measures the dollar against a number of foreign currencies — was up more than 7 percent through the end of 2015 and prices for goods are lower, especially for products produced overseas. But the impact on independent business owners is mixed.
"Companies that compete internationally, like manufacturing firms, are going to have a tougher time being cost competitive," Feroli says. "On the other hand, companies that have a lot of imported content — wholesalers, distributors of foreign products — generally will see those products be less expensive."
The prognosis? Feroli says that declining energy prices and the strength of the dollar are probably temporary factors. But the hiring challenges may last longer.
"Tighter labor markets are here for at least a few years," he says. "The Federal Reserve has no intention of reversing the gains we've seen in employment. I would expect that until the next recession hits—which hopefully won't be for several years—that we're going to be living with turnover a lot more than it has been the last few years."
Brian O'Connor is an editor and writer in New York who writes about business and brands.