Business owners in Ohio upbeat, but wary

PNC survey: Only 14% plan to increase hiring

4/4/2013

Small and midsized business owners in Ohio are optimistic about the state’s economy this year, but they continue to want proof it is sustainable before they expand their hiring, a new economic report said Thursday.

About 58 percent of Ohio business owners surveyed for the 2013 Spring PNC Bank Economic Outlook report were at least moderately optimistic overall about the next six months.

When it came to their own firms, 21 percent of owners were optimistic about their prospects over the next six months, up from 17 percent a year ago. And 39 percent of owners said they expect home prices to rise in 2013, up from 21 percent a year ago.

On the negative side, only 44 percent expect their sales to rise, down from 56 percent a year ago. And just 33 percent expect their profits to increase, down from 38 percent a year ago.

Still, 40 percent of owners said that business conditions and demand have improved enough to justify a price hike, and they plan to raise prices over the next six months.

However, raising prices doesn’t mean hiring more workers, the survey found.

Only 14 percent of owners said they expect to increase hiring in the next six months. That is down from 15 percent a year ago and 17 percent just six months ago.

“They are more optimistic, and that is based in real improvements in the real economy. Things have gotten better,” said Mekael Teshome, an economist with PNC who helped prepare the bank’s Ohio report.

“Owners are more optimistic about the local economy. More firms expect higher sales, more expect to increase their selling price, and these firms expect house prices to increase,” Mr. Teshome said. “But the first three really only show that businesses are seeing more business come their way. That’s why they think they can pass on higher prices. There’s stronger demand.”

But the optimism is tempered by fears of a setback, which is restraining hiring, the economist added.

“They are expressing reservation about hiring and opting to do more with less,” Mr. Teshome said.

The PNC economist said several factors are leading to the reluctance to hire, but it boils down to one thing: Ohio’s business owners want “to play it safe.”

“The first factor is it’s been a slow recovery in the past four years. Every year in the past four years it seems we’ve hit a speed bump along the way,” Mr. Teshome said.

“So I think the belief is that things are improving, but it’s going to take time for people to feel comfortable and feel this recovery has staying power. Until that happens, they will take less risk and spend their money on technology or equipment, because if there’s a downturn, you don’t have to fire a computer,” he said.

Mr. Teshome added, anecdotally, that some firms contacted for the survey expressed uncertainty about how the Affordable Health Care Act will affect their future costs. “The ones most likely to be affected are the ones that are just big enough to be required to make changes,” the economist said.

Ohio business owners appeared slightly less optimistic than small and medium-sized business owners nationwide.

Nationally, PNC’s survey found that about 23 percent of owners are optimistic about their own firms, while just 21 percent of Ohio owners felt that way.

About 50 percent of owners nationwide expect their sales will rise, while just 44 percent of Ohio owners felt that way.

And 15 percent of owners nationwide expect to hire workers in the next six months, while only 14 percent of Ohio business owners plan to hire.

“Compared with the national averages, there is more reservation in the Ohio numbers and the extra caution there has to do with the varying performances throughout the state,” Mr. Teshome said.

“Central Ohio is doing well, but the more industrial parts — and this would include Toledo — are dealing with job volatility.”

Contact Jon Chavez at: jchavez@theblade.com or 419-724-6128.