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Weekly UpdatesCAUTION CONTINUES TO govern the Arkansas marketplace, a survey shows, and experts confirm that Arkansas' business decisionmakers are still tiptoeing through economic mire.
"Everybody is still very cautious in terms of salary expectations, hiring expectations, revenue expectations," said David Bell, research director at MarketSearch, the research division of Mangan Holcomb Partners of Little Rock.
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That vigilant behavior seems also to have spread into the homes of Arkansas business executives.
The recent Inc. Tanc survey, a joint venture between MarketSearch and Arkansas Business, shows that key executives fear their income levels may not be set in stone and have curbed their personal spending on nonessentials.
Just over 13,000 Arkansas Business and ArkansasBusiness.com readers were surveyed. Of those, 827 responded, giving a 95 confidence level of plus or minus 3.3 percent.
The responses revealed that 37 percent, though not afraid of losing their jobs, fear their income levels could fall.
Though a solid 33 percent of respondents think that their positions are completely secure, 15 percent of execs are somewhat concerned about their jobs, while another 5 percent are very concerned. Two percent of respondents had already lost a job in the current recession.
"The good news is people feel secure about their jobs," Bell said. "But you continue to have this problem with income. Because if you don't get income into people's hands, they're not going to go out and do discretionary spending, which is what kind of drives the economy."
With executives feeling uncertainty because of the precarious economic environment, many are applying more financial discipline to their personal pocketbooks. About 64 percent of respondents said that they had reduced spending on nonessentials. Fifty-one percent of surveyed execs have paid down debt. About 34 percent have deliberately made plans to increase savings, and 31 percent of respondents have changed their investment strategies.
"There is certainly a culture of frugality out there in this recession," said Kathy Deck, director of the University of Arkansas' Center for Business & Economic Research at the Sam M. Walton College of Business.
"It doesn't make sense right now to be perceived as high-flying, devil-may-care, spend-it-whether-you've-got-it. That's just not consistent with the overall economic climate. And so I think a lot of folks are anxious to demonstrate that they are cost-conscious and that they are positioning their businesses or even their personal finances to be in the best position when the economy turns up again."
Most Pressing issues
Decision-makers at Arkansas businesses continue to exhibit concern about the usual suspects--the economy, health care, regulation, credit availability, etc.
And while the two most pressing issues remain the same in the eyes of key Arkansas business execs--the economy and health care--other issues are garnering increased attention. Some concern over the economy seems to have shifted to other areas like business regulation, staffing and fuel and energy costs.
For the fourth quarter of 2008 and the first quarter of 2009, the economy dominated other pressing issues, with 77 percent of respondents calling it their greatest concern. However, that figure fell to 71 percent in the most recent quarter.
"One of the things, of course, is that a lot of well-run companies--[and] there are a lot of well-run companies--have adjusted their expectations and adjusted their employment and adjusted their situation so that they're better positioned," Deck said.
"And so it's not that the economy doesn't bother them ... the 70s are a high number. But it's that they've taken the steps to deal with what is the new reality."
Concern over health care grew one percentage point from the first quarter to 24 percent. Nineteen percent of executives surveyed called business regulation one of the most distressing issues, which is up two percentage points from the previous quarter.
Concern over energy costs seems to be throttling up a bit. Thirteen percent of respondents, compared with 10 percent in the first quarter, think the cost of fuel and energy is one of the most significant problems.
Also, 15 percent of execs, which is up two percentage points from the first quarter, think recruiting, retaining and training staff is one of the two most significant problems.
On the other hand, Arkansas decision-makers seem to see a thawing credit market. Only 17 percent of survey respondents dubbed credit availability one of the two most pressing issues. During the first quarter, 20 percent of execs ranked credit in the top two.
"It's not that we're full-steam ahead in terms of credit markets, but we certainly have seen some unfreezing from where we were at the worst of this downturn," Deck said.
Revenue Expectations
Revenue expectations, based on year-to-date results at the end of the second quarter, remained consistent with first-quarter numbers, with a few small fluctuations.
Eleven percent of business executives expect their 2009 annual revenue to be 10 percent higher than 2008 revenue. The first-quarter survey showed the same percentage of executives expecting a 10 percent year-over-year increase.
However, five percent of respondents, compared with 4 percent in the first quarter, expect 2009 revenue to be 7 to 9 percent above 2008 revenue.
Execs expecting 2009 revenue to grow between 3 and 6 percent year over year held steady at 11 percent.
Stability, with fluctuations of less than 3 percent in either direction, was still the most common theme among Arkansas business decisionmakers. About 31 percent of respondents expect revenue to hold steady compared with 33 percent in the first quarter.
Nine percent of respondents expect revenue to ebb between 3 and 6 percent, while 7 percent of execs expect revenue to decline between 7 and 9 percent.
The second-largest block of respondents (18 percent) still expects revenue to be down more than 10 percent. That pool remains unchanged from the first quarter.
Recovery Package
More than half of respondents (53 percent) have not or do not expect to benefit from the $787 billion federal stimulus package.
Seven percent of Arkansas executives say their company has seen a direct benefit from the American Recovery & Reinvestment Act, while 6 percent claim they've benefited indirectly.
"The stimulus money has been really, really slow getting into the economy because it's such a vast amount of money to pump into the economy," Bell said.
Deck added that much more money should begin flowing into the economy during the last two quarters of 2009 and the first couple of quarters in 2010.
Six percent of surveyed execs said their businesses had yet to reap any rewards, but they expect a direct benefit later. Additionally, 13 percent haven't felt any effect yet, but expect an indirect boost soon.
Staffing Levels
Survey results reveal that companies that plan to add staff held steady at the same level (18 percent) as the first quarter.
Most business leaders (64 percent) plan to maintain current staffing levels throughout the remainder of 2009. That reflects a 3-percentage point increase in confidence from the first quarter's 61 percent. Additionally, only 13 percent of respondents plan to reduce staff compared with the 14 percent who had plans to make cuts in the first quarter.
Regarding salaries, the number of respondents expecting to freeze salaries seems to have stabilized at 46 percent.
"We've gotten basically the same number for the last three quarters, which again I think that's good news in that we're not seeing a lot of job loss," Bell, of MarketSearch, said.
Slightly fewer decision-makers (5 percent) in the second quarter expect to increase salaries by more than 4 percent whereas 7 percent of execs expected to dole out raises of 4 percent or more in the first quarter.
For the second quarter, 30 percent of respondents expect to give raises of less than 4 percent compared with the 27 percent who planned to do so in the first quarter.
One-third of respondents asserted that the current health care system is better than any of four reform options. Of those who favor reform, 22 percent oppose mandatory coverage, 16 percent support an alternative to private pay, 11 percent support the private pay system and 6 percent back a government single-payer system. Twelve percent said they weren't sure or had no opinion.
Nearly half of the Arkansas business leaders who responded to the survey indicated that the health of the residential housing market directly influences their businesses. Fortunately for those businesses, many Arkansas executives said they'd seen that sector improving. About 47 percent of respondents said they had seen an improvement in the residential housing market in the last three months compared with 42 percent who said they haven't. Eleven percent weren't sure or had no opinion.
And the survey respondents aren't the only ones recognizing some signs of recovery, even though it may be slow going.
"When the second-quarter [gross domestic product] numbers, for example, come out, they'll be 'less bad,'" Deck said. "Employment is likely to continue to fall even as output recovers. So that particular metric is not seeing improvement, but that is a lagging indicator and that is true in all recessions."
By Jamie Walden
jwalden@abpg.com
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