As business people, we must constantly be concerned about the economy. We must take reports from activity in the recent past and combine it with projections for the future, stir in a grain of salt, and use the product to help shape our decision making. To make sure that we are all as informed as possible, we want to dedicate this week’s blog post to an update on the state of the economy.
The National Economic Outlook
On a national scale, things seem to be coming together very well from an economic standpoint. The National Association for Business Economics released some figures from a survey that polled economists and business people throughout our nation. The results predict that gross domestic product (the sum of the value of all products and services produced within a nation’s borders within a given year) will increase 3.3% this year versus 2010. While that seems like a small figure, realize that it represents billions of dollars that will be produced by business people and distributed out via payroll and taxes before the cycle starts over again. Let’s review some of the recent events and possible future happenings that will fuel this growth in GDP.
- Last month service industries throughout the U.S. expanded at the fastest rate since 2005!
- Retailers such as J.C. Penney and Macy’s experienced same-store sales growth in February 2011, which beat out most analysts’ predictions for those sectors of retail merchants. This indicates increased consumer confidence and disposable income, which is good regardless of which products/services you sell.
- Growth in labor markets was evidenced by both fewer unemployment claims and projections showing growth in employer payrolls.
- Local Tempe, Arizona-based supply management association ISM reported that manufacturing in February 2011 grew at the most rapid pace that it has since May of 2004.
Economic Outlook Here in the Grand Canyon State
For business owners and managers in Flagstaff and Tucson, we are primarily concerned with the local economic outlook. Obviously the national news gives us reason to be optimistic, but local factors will affect our bottom lines first. Some recent legislation from our state legislature and governor will bring some very business-friendly changes.
- Beginning in 2014, the corporate tax rate (state tax not federal) will begin to be reduced over a three-year period, until it is 5%. This change from the current 7% rate means that a substantial amount of your profits will stay in your possession.
- Industrial and commercial property taxes are set to drop a touch. The current assessment ratio (a figure combined with the face-value appraisal of a property to determine tax rate) of 20% will decrease to 18% between 2013 and 2017, saving property owners on taxes and possibly giving business owners more leeway to negotiate reduced rent.
- Some tax relief is also on the way for some Arizona-based manufacturers. Right now you pay a higher tax rate if you manufacture a product in Arizona but sell it in another state. Over the next few years, this taxation penalty will be reduced (not entirely yet still reduced), making life a bit easier for those who make the products that people need.
With a brighter national and state outlook, it appears that there are promising things in store for the Arizona business community. We are in the beginning stages of a period of growth, according to all sides. With growth comes the need for additional staff to fill your orders and please your customers. The recent economic conditions have taught us to err on the side of caution. The best way to do that from an employment standpoint is to hire slowly and use temporary labor. This gives you a chance to ensure that you really do need new staff and even try out new employees before you hire them.
The end of the year is here. We hope you were able to minimize any losses that might have occurred in 2010 and are putting together a sound strategy for 2011. By most predictions, next year should be a lot better for businesses than this year, as the economy continues on a slow but seemingly steady uptick. Let’s take a look at some of the facts and predictions that are in place, which should make doing business in 2011 less stressful than it was in 2010.
2011 Positive Outlook
- The WSJ Economist Survey predicts a 3% increase in GDP (sum of all goods and services produced within the United States) in 2011.
- The survey also indicates a reduced prediction that a double digit recession will occur to 15%; the number was at 22% in September.
- Economists polled in the survey also estimate Increases to be experienced especially by those businesses that operate in retail sales and manufacturing.
- 80% of CEO’s involved in the Business Roundtable predict sales increases in first half of 2011.
- 59% of CEO’s involved in the Business Roundtable expect to increase their spending on equipment (great for the manufacturing industry).
- A payroll tax cut pertinent to Social Security taxes will be granted to employees (employers will not experience a reduction in the amount that they match), which puts more disposable income in consumers’ hands, which should be immediately felt by the hospitality and retail industries
These predictions provide a basis for a lot of optimism for business people in 2011. The economy should be growing, which will present more opportunities and hopefully in the long run, more customers. To be fair there are some predictions for cost increases that will directly affect business owners.
Potential Cost Increases for 2011
- Materials- As the economy rebounds, basic supplies and resources are expected to become more costly. This could especially impact commodities, which include everything from oil to copper.
- Health care- While health care reform is still not set in stone, it would be unwise to not calculate a cost increase here.
- Labor- Hiring is expected to increase, so with it comes more salaries, payroll expenses, taxation matching, etc.
As you can see, economists and CEO’s alike seem to be predicting more good than bad on the horizon. While that is great news, 2011 will still require a steady hand and a carefully prepared plan for business owners. Two of the anticipated cost increases are pertinent to labor and health care. Both of those increases will directly affect your bottom line and will be financially measurable the first quarter that you start bringing on new people. There is no reason to be too pessimistic; after all bringing on additional staff means that you are growing and on your way to increased profits.
Taking a cautious approach to hiring will be the best way to grow while reigning in your company’s spending. Using temporary labor might be just the answer you are looking for. Think about the advantages of temps when you need to be cautious with spending.
- No money spent on recruiting-Save yourself from paying for job listings, paying to interview, and paying current staff to take time to perform both of those functions.
- Predetermined expenses- Temps come with a set fee and we take care of all of the extrinsic costs like payroll and taxation matching.
- Simple to terminate unnecessary employees- If your predictions are a bit optimistic and you decide that you don’t need that much staff, it is easy to reduce payroll costs by simply using fewer temps, as opposed to laying off a new hire.
We wish everyone the best in their financial endeavors in 2011. If you are looking for ways to save money and time while you grow, feel free to give us a call at 1-877-522-7797. We can tell you how to save on staffing throughout Arizona, from Phoenix to Flagstaff.
One of the most flexible options that any staffing agency can ever offer their clients is the option to try out an employee on a temporary basis and then decide whether or not they would like to hire the employee on full time. This is a great option for both the employer and the employee, as it fuses the best aspects of both temporary employees and direct hire services.
There are many reasons that an employer benefits from finding new staff in this manner. Let’s begin with the benefits that are borrowed from temporary staffing and direct placement as separate entities.
- Save money up front by not having to fund the hiring process or costs associated with payroll and benefits.
- Save time by locating a capable employee with a phone call as opposed to the interview process.
- You can immediately replace an employee who leaves unexpectedly.
- You can retain peace of mind knowing that your new staff member is coming from a trusted source.
While those advantages exist for temporary staff and direct placement, temp-to-hire offers its own advantages due to its flexibility.
- You can make sure that your company really needs a new staff member. We have all been there: we identify a gap in our operations and automatically assume that we need a new hire to fill it. Sometimes we regret the new hire because we realize that if we changed some internal processes or simply outsourced something, we could have bridged the gap more effectively and at a lower cost.
- You can make sure that the new hire meshes from a company culture and personality standpoint. It might take a while to truly gauge new person’s personality and work ethic. The temporary aspect of temp-to-hire gives you this trial period.
- We handle your probationary period for you. Temp-to-hire employees come in knowing that the job might not last. In spite of probationary periods, regular hires do not usually take this into consideration. This can make termination considerably more difficult and uncomfortable for the employer.
- You have the ability to easily replace the employee in the event that you decide that you do in fact want another staff member, but feel that the original employee that you located might not work out. It just takes a hassle-free phone call to replace the temp with someone who is a better fit for your needs, which may change slightly after the original employee comes on.
While temp-to-hire is a great option, it may not be for everyone. Some employers know for certain that they need a permanent staff member, while others know in advance that their staffing issue is a temporary situation. If your situation does dictate that you need flexibility you will likely be very happy with the temp-to-hire option. We arrange everything so that you only have to focus on your bottom line.