Where the Jobs Are
June 14, 2016
creation across the American economy tumbled in May, with the economy adding
just 38,000 positions. Economists,
analysts, and politicians are trying to make sense of these numbers. The sharp decline in labor force participation
over the first half of 2016 casts doubt on hopes for a stronger economic
recovery. What’s not being discussed is
where the new jobs are being created –
and what can be done to encourage firms to hire more workers.
history is any guide, we can say with confidence that the majority of the
38,000 jobs created in May were in firms that comprise the “Mighty Middle”,
rather than in very large or very small firms.
According to the National Center on the Middle Market at the Ohio State
University (NCMM), the American middle market is defined as companies with
revenues between $10 million and $1 billion.
These firms represent only 3% of all U.S. companies but are 200,000
strong and present in every state and region of the country. Middle market firms are found in every sector,
led by services, manufacturing, wholesale trade, retail trade, construction,
financial services and healthcare. Some
of these firms are local or regional players, others are nationally and
internationally known. Those that export
have significantly higher growth and revenue than those that are not globally
engaged. Taken together, the America’s “Mighty Middle” would be among the
world’s top five economies.
business and large multinationals frequently garner press attention and policy
focus, middle market companies just keep on working. They employ nearly 48 million people, contribute
one-third of private sector GDP, and are responsible for as much as 60% of new
jobs created since 2014. These firms consistently outperform both small and
large companies. Analysis by
the NCMM shows that middle market growth over the past 12 months (1Q’16) was 6.3%,
compared with -3.4% for the S&P 500.
Middle market employment increased by 3.6% versus just over 2% for large
and small companies.
the Center’s most recent survey, some 52% of middle market firms project
positive revenue growth for the coming year, with confidence up across the
global, national and local economy. What’s more, middle market companies
consistently invest capital to add jobs, equipment, make acquisitions and train
employees, and 63% say they plan to invest in 2016 and 34% expect to add jobs.
tax and consulting firm RSM US has developed a U.S. Middle Market Business
Index to quantify business conditions affecting the middle market. The 2Qtr 2016 report shows that respondents
intend to increase hiring and compensation as well as capital expenditures
during the next six months. RSM Chief
Economist Joseph Brusuelas commented that, “Current and future expectations for
earnings provide a stark contrast with conditions in the corporate sector that
have broad exposure to the global economy. This shows the middle market
continues to outperform large corporations and is anticipating a stable economy
in the second half of the year.”
bemoaning the anemic job creation numbers for May, economists, analysis and politicians
should focus their attention on what is working and what more can be done to
strengthen America’s middle market – which is a strong, yet under-appreciated, engine of growth in our