SBJ economic outlook survey reveals optimism

Local economy

One of the most dramatic shifts from year to year is in perception of the local economy. Almost 63 percent of respondents indicate the economy is better now than it was a year ago – up from 47 percent in the 2004 survey.

The number of respondents who felt the local economy was worse year to year dropped from 11.5 percent in 2004 to slightly less than 7 percent in 2005, while the number who felt the local economy was unchanged also dropped, from 40.5 percent a year ago to just under 31 percent now.

Looking ahead, a majority of respondents, 43 percent, say they expect the local economy to grow 3 percent to 4 percent in 2005.

A year ago the majority of respondents, 42 percent, expected growth of 1 percent to 2 percent.

National economy

The latest survey shows southwest Missouri businesspeople also are bullish on the national economy.

Sixty-five percent of respondents say the economy is better now than it was a year ago, up from 58 percent in 2004, and only 11 percent of respondents say the national economy is worse now than a year ago – down from almost 17 percent who described it as worse last year.

In terms of growth, almost 49 percent of respondents – up from 41.5 percent a year ago – expect the national economy to grow by 3 percent to 4 percent in the new year.

While the majority of respondents in last year’s survey, 44 percent, expected the national economy to grow by only 1 percent to 2 percent, that dropped to 37 percent in the most recent survey.

Interest rates

Heading into 2004, the majority of SBJ subscribers – 61 percent – expected interest rates to rise by 0 to 1 percent – and they were right. Mortgage interest rates and the federal funds rate rose slightly last year – mortgage rates increasing less than a point at their highest, and the Federal Reserve’s rate increases – five of them since June – totaling 1.25 percentage points.

Heading into 2005, 51 percent of respondents expect rates to rise by 0 to 1 percent, while 44 percent expect an increase of 2 percent to 3 percent.

Local jobs

Many Springfield companies are planning to hire in 2005, with 47 percent stating that employment will increase, compared to 33 percent last year. Although 49 percent state that employment will be unchanged in 2005, that’s down from 62 percent in 2004. Of respondents planning to add staff in 2005, 20 percent are in the financial services arena, including accounting, banking, insurance and financial planning. Financial services respondents plan to add approximately 64 jobs in the new year.

Thirteen percent of respondents who plan to add jobs are in the manufacturing industry, and they plan to add a total of 63 to 79 positions, the majority of them – 36 jobs – in the food processing and dairy products industries.

Another 13 percent of respondents adding jobs are in the construction services and supply industries, accounting for 23 to 28 new jobs in the new year.

If companies surveyed follow through on their hiring projections, they will create a total of 308 to 347 jobs in 2005.

In terms of salary increases, more companies are planning raises in 2005 – 87 percent versus 83 percent a year ago – and the 2005 raises are larger.

Approximately 54 percent of companies will provide salary increases of 3 percent to 6 percent in 2005, compared to 46 percent in 2004.

Health care

The majority of respondents’ companies – 73 percent in 2005 and 71 percent in 2004 – offer a health care benefit. However, employees are being asked to shoulder a larger portion of the cost.

In 2004, a majority of respondents, 43 percent, indicated they paid 100 percent of premiums. That dropped to 38 percent in 2005. Meanwhile, the number of companies splitting the premium cost 50-50 with employees increased from 15 percent in 2004 to 23 percent in 2005.

The typical health insurance rate increase in 2004 was 11 percent to 15 percent, but in 2005, the typical increase is 6 percent to 10 percent, with the 11- to 15-percent increase coming in a close second.

However, while almost 22 percent of respondents faced increases of 16 percent to 20 percent in 2004, only 9 percent face increases that large in 2005.

Handling health costs

A major shift occurred between 2004 and 2005 in how companies are handling health insurance rate increases.

In 2004, 53 percent planned to reduce benefits, 84 percent planned to increase employee copays, 73 percent planned to raise deductibles and 53 percent planned to change their insurance company or health plan.

In 2005, only 15 percent plan to reduce benefits, 33 percent plan to increase employee copays, 25 percent plan to raise deductibles and 19 percent plan to change their insurance company or health plan. Meanwhile, 44 percent indicate they will absorb the increase.

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