A year ago, historic inflation resulted in one of the most dismal outlooks from New Jersey businesses in recent memory.
But NJBIA’s 65th annual Business Outlook Survey for 2024, released today, shows a leveling off from the overall negativity from New Jersey’s business community amid a slow retreat from record-setting inflation.
Among the mixed bag of results this year were certain improvements in staffing challenges and how New Jersey compares to other states in multiple categories. But there was also a notable decline in sales and profits in 2023 and outlook for profits in 2024.
“While it’s clear businesses are still struggling with inflation and the increased costs of running their operations, it does appear that last year represented a low water mark that we’re hopefully crawling out from,” said NJBIA President and CEO Michele Siekerka.
“That’s not to say the 2024 outlook is positive overall. There are still many issues our job creators need to contend with, and newer concerns over rising energy costs and mandates. But if our policymakers can be more proactive in improving our business climate, we can move the needle even more in the right direction.”
Following a similar pattern, the business outlooks on the national and New Jersey economy for the first six months of 2024 also were not positive. But they were less bleak than last year, when the 2023 forecast rivaled that of the Great Recession of 2008 and 2009.
Inflation and Affordability
2023 was a year in which Gov. Phil Murphy signaled he will let a 2.5% Corporate Business Surtax sunset on Jan. 1, 2024. He also signed impactful legislation that will greatly improve New Jersey’s tax treatment of foreign income.
- When asked if the governor and New Jersey lawmakers have done enough to address business affordability in the past 12 months, only 4% said yes, but 28% said they were unsure.
- 68% said lawmakers had not done enough to address business affordability. Last year, however, that number was 75%.
- National factors are still at play: 89% of business owners or executive staff said they were substantially impacted or moderately impacted by inflation in 2023.
- But those who said they were substantially impacted by inflation decreased from 45% last year to 36% this year.
- 51% said they were substantially impacted by inflation for supplies and materials, compared to 65% who said the same last year.
- 40% said they were substantially impacted by inflation for labor costs this year, compared to 48% last year.
- 43% said they were substantially impacted by inflation for fuel costs, compared to 63% last year.
Energy Costs and EVs
The 2024 Business Outlook Survey found there were concerns about increased energy costs, both currently and in the future.
Businesses did show a willingness to engage in electric vehicle usage for their operations. But stopped well short of supporting EV mandates.
Among the findings:
- 52% said increased energy costs have been a detriment to their business over the past two years.
- Of those, the top three bottom-line impacts of increased energy costs listed were:
- Made less profits (81%)
- Increased prices for goods and services (74%)
- Reduced workforce costs (staff/compensation/benefits) (28%)
- Reduced usage of utilities (20%)
- Used lower-cost materials to produce final products (10%)
- 73% said they somewhat opposed (14%) or strongly opposed (59%) the ban on selling new gas-powered vehicles by 2035; 19% strongly or somewhat supported the ban, while another 8% said they weren’t sure about it.
- 53% said their business currently utilizes a company-only vehicle or vehicles.
- Of those, 91% said those vehicles are gas-powered; 7% said they have a combination of gas-powered vehicles, EVs or hybrids and 2% said they were EV/hybrid only.
- Of current business owners with only gas-powered cars, 56% said their next business vehicle will be gas-powered. But 36% said they would consider an EV, even though they had concerns about cost and mileage range. And another 8% said their next vehicle definitely would be an EV or hybrid.
“The lesson we can take here is EV usage will grow, as will its accompanying technologies,” Siekerka said. “But New Jersey should let the marketplace dictate that and avoid mandates that don’t allow for appropriate infrastructure or affordability in a too compressed timeframe.”
Profits
From 2012 to 2019, most New Jersey businesses reported more gains than losses in the NJBIA Business Outlook Survey.
But that all changed during the pandemic year of 2020, and the climb from that hole continues as follows:
- In 2023, only 32% of respondents reported profits for the year. In 2022, that number was 36%. At the same time, 44% reported a loss, compared to 40% in 2022.
- The 2024 outlook for profits is also lukewarm. Only 37% believe they will make a profit, compared to 28% who anticipate they won’t. That net positive of 9% is the lowest outlook for profits since 2012.
- Of the 37% hoping to be on the plus-side for 2024, 13% are only forecasting profits of 1% to 3%.
“Small businesses face considerable headwinds when trying to make a profit,” Siekerka said. “This is why NJBIA uses a mantra to Trenton lawmakers that ‘every dollar counts’ when informing on policy.”
Staffing
- A year ago, 70% of respondents said they were challenged to find appropriate staffing. But in 2023, only 55% said they had that challenge.
- Respondents were asked to list the top three factors leading to those staffing challenges, with the following results:
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- Not enough candidates or applicants to fill open positions (76%)
- Candidates lacked the required skills or qualifications (67%)
- Unable to provide the requested compensation or benefits (34%)
- Faster-than-typical employee turnover (20%)
- Unable to provide requested hybrid/remote work arrangement (16%)
- Candidates lacked sufficient access to childcare services (8%)
- Greater-than-typical number of employee retirements (8%)
Employment
New Jersey businesses continued to see an incremental rebound in hiring levels in 2023.
- 23% increased hiring this year, while 18% decreased hiring.
- That 5-point differential inches up from the net zero hiring found in 2022 and a notable improvement from the net negative of -21% in 2021 and -23% in hiring in 2020, which were attributed to pandemic closures and their aftermath.
- For 2024, 28% predicted they will increase employment, compared to 7% which predicted less hiring – a +21% net positive hiring outlook; 66% said they’ll stay about the same.
Wages
Efforts by New Jersey employers to increase wages are continuing.
- In 2023, 34% of businesses increased pay for employees by 5% or more. Three years ago, during the height of the pandemic, that number was only 12%.
- Overall, 78% increased wages in 2023.
- Despite uncertain economic outlooks nationally and in New Jersey, businesses expect that upward trend to continue in 2024, with 21% saying they’ll increase wages more than 5%.
- 37% said they’ll raise wages between 3% and 4.9% in 2024.
- 78% said they’ll increase wages in 2024, while 22% anticipate no change in wages.
NJ Competitive Levels
This is typically an area of the survey where the state struggles. But there are a few bright spots and improvements to be found.
- 48% rate the quality of New Jersey public schools to be better than other states. That’s a bump up from 45% last year.
- 29% said the quality of New Jersey’s workforce was better than other states. That’s up 2 percentage points from last year and 8 percentage points from 2021.
- 24% said New Jersey is better at protecting the environment than other states.
- For the second straight year, 34% said New Jersey was a worse place to live than other states. In 2021, however, that number was 46%.
- 15% said the state does a better job in promoting economic development. That’s up from 11% last year.
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- 83% said New Jersey was worse than other states for taxes and fees
- 67% said New Jersey was worse than other states in controlling government spending
- 63% said New Jersey was worse than other states in controlling health care costs
- 60% said New Jersey was worse than other states in controlling labor costs
- 57% said New Jersey was worse than other states for the cost of regulatory compliance
“These are great areas for policymakers to focus on to make New Jersey more competitive and affordable,” Siekerka said. “These are the kitchen table areas for New Jersey businesses.”
NJ’s Economic Climate and Challenges
- When asked about the current business conditions in their industry:
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- 29% said they were experiencing a slowdown (5 percentage points more than last year)
- 17% said they were experiencing an expansion
- 10% said their industry was moving from a slowdown to a recovery
- 7% said they were moving from an expansion to a slowdown
- 37% said conditions in their industry were staying the same
- For a second straight year, 58% of respondents said they had no plans to expand.
- 22% said they would expand in another state
- 14% that would expand in New Jersey
- 6% said they would expand in New Jersey and another state
- As a location for new or expanded facilities, 30% listed New Jersey as very good or good, which is a 9-percentage point increase from a year ago.
- 37% described it as fair
- 33% ranked it as poor
- Only 12% said they believe New Jersey has made progress over the last year in easing regulatory obstacles. That number has declined steadily from 24% in 2017.
- 21% said they had postponed installation of equipment or had expansion delays due to permitting or a regulatory process.
- 44% said they are planning to keep New Jersey as their domicile in retirement. That number is up from 39% last year and 32% two years ago.
- For the third straight year, the overall cost of doing business was listed as the most troublesome problem for New Jersey businesses – with 24% listing it as tops among their Top 4. That was followed by:
- 16% for availability of skilled labor
- 14% for health insurance costs
- 14% for property taxes
- 78% of respondents said they expect their health benefits costs to go up in 2024. Of those, 22% anticipated those health benefit costs to rise 11% or more in 2023.
- 67% expected an increase in local property taxes, 31% expected them to remain the same, and only 1% expected a decrease.
Economic Outlooks
The economic outlooks for both New Jersey and the nation were very dismal a year ago. This year, the outlooks have improved, but are still negative overall.
- 45% rated New Jersey’s economy as fair and 24% listed it as poor, which is 3 percentage points less in those negative categories than a year ago.
- 28% ranked the state economy as good, compared to 25% in 2022 and 19% in 2021.
- When asked how New Jersey’s economy will fare in the first six months of 2024, only 14% reported it would be better, while 45% said it would be worse. That’s a -31% net negative outlook, which isn’t good, but better than the 36% net negative outlook a year ago.
- 70% rated the U.S. economy as fair (42%) or poor (28%) in 2023, compared to 81% which labeled it fair or poor in 2022.
- 47% said they believed the U.S. economy would perform moderately worse (36%) or substantially worse (11%) in the first six months of 2024.
- Comparatively, only 16% said the U.S. economy would perform substantially or moderately better in the first half of next year. That’s a -31% net outlook for the national economy, which is actually an improvement from the -40% net outlook for 2023.
- Only 22% called for a substantially or moderately better first six months of 2024 in their industry – compared to 26% who said it would be substantially or moderately worse.
- That’s the second straight year of a net negative industry outlook. Prior to that, there hadn’t been a net negative in industry outlook since 2012.
Sales
- Actual sales for New Jersey businesses took quite a step back in 2023, with 41% claiming an increase in sales this year. In 2022, that number was 51%.
- 43% projected an increase in sales for 2024 – which is 6 percentage points less than the 2023 projection. That’s compared to 26% who foresee less sales next year.
- Overall, that’s a +17% net positive. A year ago, that net positive outlook for sales was +31%.
Purchases and Prices
The slightly improved take on inflation in 2023 resulted in the reduction of price increases for the year.
- 61% said prices for their products and/or services increased in 2023 (10% increased substantially, 51% increased modestly). That’s compared to 70% who claimed an increase in products and services in 2022. Only 3% said they decreased prices this year.
- 37% are expecting to increase the dollar value of their purchases in 2024 and 20% are anticipating a decline. That’s a net positive of +17%, but 13 percentage points lower than the outlook for 2023.
- In 2023, 61% of businesses said they made investments in productivity. That continues a positive trend of 55% in 2022, 54% in 2021 and 50% in 2020, and just about matches the mark from the pre-pandemic years of 2019 (62%), 2018 (61%) and 2017 (60%).
About the Survey: Questions for NJBIA’s 65th Annual Business Outlook Survey were sent to New Jersey business owners and executive staff in September and October 2023. The report is based on 503 valid responses. Most respondents were small businesses, with 61% employing 24 or fewer people.
