New York State Business Climate Study, May 2001

We hypothesized that our data might indicate differing perceptions between small and medium/large businesses. We found, however, their responses mirrored each other closely. There were no significant differences between their responses to a wide range of economic perceptions covered in this survey. The same held true for firms located upstate, versus those located downstate. In only a few instances did we see a difference between their upstate and downstate opinions.

Their Voice: Bush's Tax Plan

As this survey was under way, President Bush's tax plan was being considered, and eventually passed, by Congress. Respondents were asked what effect Bush's tax cut plan would have on their businesses. The 389 who responded to that question were nearly equally divided in their assessment: 49 percent said that the plan would have little or no effect on their business, and 46 percent said it would have a positive effect, free up spending money, stimulate the economy or help their businesses. The remainder of the respondents said they did not know what effect the tax cut plan would have.

This pattern did not vary among small and large businesses. Among those with fewer than 100 employees, 45 percent predicted a positive effect, and 50 percent said it would have little or no effect. Among those with 100 or more employees, 49.5 percent said the effect would be positive, while 46 percent said it would have little or no effect.

There was a difference, however, between opinions in the state's two regions. Upstate businesses were much more hopeful concerning the relief the tax plan might provide. Fifty-three percent of upstate businesses believed that this tax plan would have a positive effect while only 36 percent of those businesses within the downstate area believed there would be such a positive effect.

Their National Perspective

Economic Climate
The respondents were asked for their perceptions of the nation's business environment. Sixty-eight percent believed that business times are worse today than they were one year ago and only 3 percent say they are better. Twenty-nine percent said business conditions are the same as they were a year ago. Among the large businesses, only 1 percent said conditions are better than a year ago, while 33 percent see them as the same and 66 say they are worse. Four percent of the small businesses said the climate is better than it was a year ago, and 68 percent say it's worse. Twenty-eight percent say conditions are the same. Downstate businesses were more pessimistic, with 71 percent saying things are worse, compared to 66 percent of the upstate businesses. Thirty-one percent of the upstate businesses said conditions are the same as a year ago, versus 26 percent of the downstate businesses.

The majority (61%) believed more unfavorable changes are coming. Only 10 percent reported they expect a favorable future. When asked about business conditions in the nation as a whole, about half of those responding believe that the next 12 months hold a mixed bag of good and bad business conditions. Sixty-two percent believed interest rates will go down, thereby lessening their cost to borrow money.

Their New York State Perspective

Economic Climate
Respondents were asked to offer their perceptions on the business environment of New York specifically. Sixty-five percent believed state policies do a good or fair job creating a positive environment in which to do business. While size had no effect on perceptions of business climate, assessments did vary with geographic location. Among downstate businesses, 83 percent said the state government does a fair or good job creating a positive environment, compared to 56 percent of upstate businesses. Almost 60 percent of the total sample believe unemployment will go up in New York State in the next 12 months, with more than a third (37%) believing that unemployment rates will remain the same.

Future Plans: Capital Expenditure
While these perceptions of the national and state business climate are important for understanding the pulse of the New York business community, respondents were also asked to tell us what they actually plan to do over the next 12 months. Forty-three percent have definite plans to make capital investments. The majority (58%) of businesses employing more than 100 plan capital expenditures, compared to 37 percent of small business owners. These are surprising figures given their overall pessimistic view of the national business climate. Among small business owners, 52 percent said they had no plans to make capital investments during the coming year, while 34 percent of the larger business owners ruled out capital investments.

Predictably, size of the capital investment is relative to the size of the business. So while small businesses plan to make smaller investments than their larger counterparts, investments are still being made. Thirty-nine percent of small businesses plan to make an investment of under $100,000, but nearly 23 percent say they will make investments of $500,000 or more. Fifty-eight percent of large businesses anticipate making an investment of over $500,000. The total sample plans to make an average capital investment of $1.6 million in the next 12 months. Among small businesses, the anticipated mean investment is $550,000, while among the larger businesses, the anticipated mean investment is in excess of $3.2 million.

Among those who said the state is doing a good job with its policies, 48 percent anticipate making investments, 44 percent do not and 9 percent are not sure. As might be anticipated, there appears to be a relationship between positive feelings about the state's policies and plans to invest. Among those who plan to make investments, 72 percent say the state is doing a good job. Within that group, 25 percent said the investment would be $100,000 or less; 27 percent plan on investing $100,001 to $500,000, and 38 percent said their investment would be in excess of $500,000.

Even among those who were less positive about the state's policies, 34 percent said they will spend $100,000 or less; 32 percent, $100,001 to $500,000; and 30 percent, in excess of $500,000.

Future Plans: Employment
Plans for human resource investment present a similar picture. Fifty-two percent of those sampled either have definite (20 %) or tentative (32%) plans to hire additional employees in the next 12 months. Forty-eight percent of small businesses indicated a definite or strong probable intention to hire additional employees, compared to 60 percent of those larger companies. On average, approximately seven employees will be hired by small businesses, compared to 27 hired by their larger counterparts.

Among those who say the state is doing a good job, 56 percent have plans, firm (21%) or tentative (35%), to add employment; 28 percent said they do not plan to increase their workforce and 15 percent are not sure. Sixty-eight percent with definite plans to add employees said the state is doing a good job. In that group, 53 percent will add one to 10 employees; 25 percent will add 11-20; and 22 percent, 21 or more employees.

Alternatively, when asked if they plan to reduce their workforce, the majority (58%) of business owners did not, while only 5 percent do have definite plans for reductions in workforce. This finding does not vary significantly by location or size. The average reduction in the work force for the large firms is approximately 25 employees, a result that is skewed by two businesses that say they are planning reductions of more than 51 employees each. Small firms' average anticipated layoff in the next 12 months is approximately five employees per firm. Comparing these reduction rates to new employment indicates that small business across the state will increase employment.

Of those who said the state is doing a good job, 65 percent do not plan cuts, 14 percent are not sure and only 2 percent have definite plans to reduce their workforce.

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