Three of every four New Jersey businesses suffered revenue losses in 2020, while nearly half said they will take more than a year, or never will, generate the profits lost due to the coronavirus pandemic response, according to NJBIA’s 2021 Business Outlook Survey released today.
Business owners in the annual survey also showed decidedly more optimism for the recovery of the national economy than New Jersey’s economy in 2021. An overwhelming number of the more than 1,000 respondents commented about the general challenges of doing business in the state, which was only exacerbated by COVID-19 restrictions.
“COVID-19 has obviously resulted in historic challenges for businesses across the nation,” NJBIA President and CEO Michele Siekerka said. “With New Jersey a national outlier in terms of pace of reopening and capacity levels, our employers are telling us they anticipate a steeper climb in terms of our recovery.”
“As we are now confronted by a second wave of coronavirus that will continue to impact the livelihoods of many business owners, it is even more incumbent for our leadership to provide support, comprehensive planning and outside-the-box thinking to help them, and to avoid any mandates or policies that would further strike at their bottom line.”
Some responses in the 62nd annual survey include:
- 76% experienced decreased earnings through the first eight months of 2020. The following industries faced deeper losses:
- Healthcare: 93%
- Transportation: 90%
- Services: 79%
- Retail: 78%
- Manufacturing (nondurables): 78%
- 77% said they anticipated to incur future losses as the survey was being fielded in September, including:
- 27% to lose revenue through the rest of 2020
- 33% to lose revenue through the first half of 2021
- 11% to lose revenue through all of 2021
- 6% to lose revenue beyond 2021
- 47% said they will take more than a year, or never will, generate profits lost during non-essential business closures.
- 56% have sought additional or alternative funding sources through federal and state loans and grants as part of their coronavirus-based challenges.
- 59% reduced expenses and overhead in 2020. Included in those decreased expenses were:
- Reduced salaries (20%)
- Furloughed employees (22%)
- Laid-off employees (23%).
The study also found that healthcare coverage could be impacted as a result of this reduced revenue. Out of the 72% of respondents who offered health insurance in 2020, 28% said they’ll discontinue that coverage in 2021.
A new concern also emerged this year in the form of litigation brought by those who claim they contracted the disease while at the workplace.
“While there have been new laws and executive orders to protect workers, there has been no balance to speak of in terms of protecting employers,” Siekerka said. “The challenge that any small business following safety guidelines would face to afford to defend themselves cannot be understated in these trying times.”
Only 10% said hiring in their company increased in 2020, compared to 33% who reported a decrease in employment. That’s a net negative of -23% – the first negative net hiring activity in this survey since 2012.
There is a glimmer of optimism, however, for the hiring outlook in 2021. While 65% anticipated their hiring will stay the same, 25% said they will increase hiring in 2021 – compared to 10% who said they will hire less. That’s a +15% net positive hiring outlook.
Only 19% said their sales increased in 2020, while a deflating 62% saw a decrease in sales. That net -43% decline in sales marks the first net negative in this survey since the Great Recession of 2008. Even then, that net negative was only -14%.
Businesses did anticipate some sales rebound in 2021. A total of 46% anticipate increased sales in 2021, compared to 23% who foresee less sales. The +23% net positive outlook is the lowest since 2015.
Only 20% reported net profits for 2020, compared to 62% who recorded a loss. This marks the first net negative of earnings (-42%) in this survey since 2012.
Businesses do go into 2021 with some optimism – although less than in previous years. Forty-one percent expect to make a profit next year, compared to 27% who don’t. That net positive of +14% is the lowest outlook for profits since 2012, when 9% expected to be in the black.
Out of those who anticipate a profit, most (41%) only expect to make between 1% and 3%.
Purchases and Prices
As many businesses had less opportunity to sell, it’s perhaps not surprising that 31% of respondents said they increased prices substantially or moderately in 2020. At the same time, only 10% said they decreased prices. More positively, given the economic conditions, 59% said their prices stayed about the same.
Also, in 2020, 57% of businesses reported the dollar value of their purchases declined.
Respondents maintain some optimism about their future purchasing plans, with 37% expecting the dollar value of their purchases to increase in 2021 and 20% anticipating a decline. This net positive of +17%, however, is the lowest spending vision since the outlook for 2013 when the net positive was 19%.
There was also, predictably, a decline of companies making investments to improve productivity. In 2020, 50% said they committed to such expenditures – compared to 62% in 2019, 61% in 2018, and 60% in 2017.
In 2020, 54% of companies gave pay increases – down 23% from last year. Most strikingly, 40% gave no raises – 19% more than last year. Another 6% lowered their wages, compared to just 1% last year.
As for planned pay raises in 2021, 28% plan to provide a bump between 1% and 2.9%. That’s 6% lower than last year for that rate of increase. There also appears to be a majority of employers holding the line on raises – with 40% anticipating no wage increases. That’s 16% more than those who anticipated staying status quo entering 2020.
This year, 30% of respondents listed property taxes as their highest concern – a 5% increase from last year. The overall cost of business in New Jersey was second at 24%, while health insurance costs were third at 14%.
Seventy-one percent said they expect their health benefits costs to go up in 2021 – similar to responses in the previous five surveys. Fifteen percent anticipated those costs to rise 11% or more in 2021.
Liability, Cannabis, Minimum Wage
The new COVID-19 world has resulted in another new concern for business – litigation. As NJBIA continues to advocate for liability protection for employers who follow safety protocols, 45% of respondents said they would not be able to afford litigation costs.
Relatedly, 66% of business owners said they were concerned about being sued by patrons claiming they contracted COVID-19 at their workplace.
In anticipation of the legalization of recreational cannabis, 44% said they were substantially concerned about workplace safety if it became law, while 33% said they were moderately concerned.
Respondents were also asked for the first time if they felt that any employee using medical marijuana should only serve in non-safety sensitive positions. Sixty-two percent said yes, 14% said no, while 24% said they were not sure.
As New Jersey continues its set course to a $15 minimum wage in 2024, potential employer impacts remain like past years, with 51% expecting that full rate to impact their business in the form of raising prices (30%), reducing staff (18%), reducing benefits (15%), and/or automation (10%).
New Jersey’s Economic Climate
Concern about New Jersey’s overall business climate was an increasing theme in this year’s survey.
Forty percent said they’re experiencing a slowdown in their industry. Manufacturing nondurables (45%), retail (45%), services (45%), wholesale (43%), and healthcare (41%) were the industries which most reported a slowdown.
Many comments shared by respondents in the survey continued to show a loathing for high taxes and a common sentiment that New Jersey’s policies are “anti-business.”
With that, there was a continued reluctance for businesses to expand in New Jersey. Most (61%) said they wouldn’t expand. Only 8% said they would open another location in the Garden State, while 31% said if they chose to expand, it would be in another state.
As a location for new or expanded facilities, only 15% listed New Jersey as very good or good, while 37% described it as fair or average, and 49% ranked it as poor.
There is increasing discouragement with New Jersey’s regulatory processes. Only 10% believe our state made progress over the last year in easing regulatory obstacles. That number has declined steadily from 24% in 2017.
Eleven percent said they needed to postpone installation of equipment or expansion of their business due to permitting delays or the state’s regulatory process.
Only 32% said they are planning to keep New Jersey as their domicile in retirement, a 7% decrease from last year and a consistent indication of New Jersey’s relatively low appeal for people in their golden years.
New Jersey’s Competitive Levels
Coronavirus or no coronavirus, New Jersey’s challenged performance compared to other states is well established by the business community. This year, there was little change in those standards – although just about all of them are going in a negative direction.
More positively, 43% rate the quality of New Jersey public schools better than other states – although that’s a 6% decrease from last year. As for workforce quality, 29% said it was better than other states for the second straight year.
But when it comes to taxes and fees, 90% reported the Garden State was worse than other states – 1% higher than last year.
New Jersey was also listed as worse than other states in controlling government spending (80%), attracting new business (72%), controlling healthcare costs (71%), controlling labor costs (67%), attitude toward business (66%), and the costs of regulatory compliance (63%).
In each of these areas, New Jersey’s low favorable percentages were lower than the previous year by a small margin.
Pedestrian results were given when respondents were asked how to rate the recent performance of the U.S. economy, with 36% calling it good, 40% describing it as fair and 17% rating it poor.
The ratings were worse for New Jersey’s recent economic performance. Forty-six percent said it was fair, 40% said it was poor, compared to 12% who said it was good.
When asked how New Jersey’s economy will fare in the first six months of 2021, 28% reported it would be better, while 40% said it would be worse. While that -12% net outlook is nothing to celebrate, it is an improvement from the -28% net outlook for 2020.
Respondents were decidedly more upbeat about the U.S. economic outlook. Some 54% thought the national economy would perform better through the first six months of 2021, compared to 17% who said it would fare worse.
That +37% net positive outlook is 30 percentage points higher than the US economic outlook for 2020.
About the Survey
Questions for NJBIA’s 62nd Annual Business Outlook Survey were sent to New Jersey business owners and executive staff in mid-September 2020. The report is based on 1,070 valid responses.
Most respondents were small businesses, with 66% employing 24 or fewer people.