The main road remains resilient despite a growing list of challenges and countercurrents. SMB owners and employees have an increasingly long list of challenges to contend with: Consumer prices rose at their highest rate in 40 years in June. On the employment and hiring front, some of the largest and most prominent global companies have announced layoffs, hiring freezes or hiring slowdowns. Consumer confidence and sentiment is low.

Experts now estimate a high probability of a recession in the coming years due to the impact of inflation on corporate earnings and Fed policy mandates. Wall Street analysts continue to cut earnings and benchmark index estimates. Bellwether companies like Walmart cut their earnings estimates as consumer retail sales slowed. Jobless claims continue to rise and are now at their highest weekly level since November 2021 Positive news included falling commodity prices, including oil; lower mortgage and interest rates; And still a strong hiring market.

Our own key road health metrics for July revealed a slight softening in hours worked (down about 12%) and employees employed compared to June. However, these metrics remain higher than in January 2022 and compare favorably with the pre-pandemic period.

Main Street Health Metrics
(7-day rolling average; compared to January 2022)

Nominal average hourly wages have risen nearly 10% since the start of 2021. Average (nominal) hourly wages in mid-June were about 10% higher than projected from January 2021. Evidence from mid-July showed that wage inflation rose moderately compared to June and did not keep pace with inflation.

Percentage change in nominal average hourly wages and consumer dollar CPI purchasing power relative to the January 2021 baseline1
1. Change in nominal average hourly wages and (monthly) CPI for all urban consumers: Purchasing power of consumer dollars in US cities (non-seasonally adjusted) calculated relative to January 2021 baseline. Source: Homebase data, US BLS.

Most employees worry about a recession; There are some variations based on political orientation. Based on the Pulse survey of nearly 700 employees conducted in mid-July, we found that employees are either very (32%) or somewhat (47%) worried about the recession. However, there are some variations (from an overall high baseline) based on political orientation. About 90% of those who identify as very liberal or liberal are either very or somewhat concerned about the recession. For moderates, the figure is 82.5% and for conservatives it is 81.4%. Those who did not choose to identify their political orientation were relatively less concerned about the recession at a still high 76%. One possible explanation is the impact the November election may have on the economy.

Survey questions: Are you worried about recession?
formula: Homebase Employee Pulse Survey. LR-Chi Square = 24.5, P < 0.004

Maybe my current job is not so bad? Macro-economic and social forces have changed how employees view their current jobs and alternative job options. 49% of employees surveyed in July indicated that they do no Looking for a new job within the next one to two years. This compares to 41% in January 2022 and 39% in November 2021.

Survey questions: Are you looking for a new job in the next 12-24 months?
formula: Homebase Employee Pulse Survey. Ns = November (2324), January (548), June (1767), July (710).

Gas prices are the item most affected by inflation. Food expenses and rent or mortgage round out the top three categories. Consistent with CPI data, gas prices were cited as the category most frequently (50%) affected by inflation. The cost of one’s home-cooked meals was ranked first by about 20% of employees, followed by rent or mortgage costs (about 13%). As one employee put it:

“I can’t give anything. Something. The prices were so high and I was barely scraping by.

Survey questions: Which of your monthly expenses has been most affected by inflation?
formula: Homebase Employee Pulse Survey.

Most employees worry about a recession; They are also taking steps to prepare one. To prepare for a possible recession, workers are building savings (54%) and paying down debt (17%). Interestingly, however, only 5% are cutting back on entertainment (eg, going to the movies, amusement parks), eating out (3%), or traveling (<1%). These findings are consistent with recent reports indicating continued consumer strength in these segments. Finally, less than one percent of employees indicate that they are looking to switch to lower-priced products/services to prepare for a recession.

Survey questions: What steps, if any, are you taking to prepare for a recession?
formula: Homebase Employee Pulse Survey.

Much like their hourly employees, most owners are concerned about the recession. A July Pulse survey of approximately five hundred owners revealed the ubiquity of recession fears.

Survey questions: Are you worried about recession?
formula: Homebase Employee Pulse Survey.

Given the ubiquity of recession fears, most owners do no Plan to open new locations. The results for July 2022 are similar to the results for January 2022 when Omicron impacted the business (plan). From June to July 2022, the percentage of owners who indicated they would open a new location within the next one to two years decreased by nearly 3 percentage points, with a corresponding increase in the percentage of owners who indicated they did not plan to open a new location. in the corresponding period

Survey questions: Do you want to open a new location of your business in the next one to two years?
formula: Homebase Employee Pulse Survey.

Employers’ hiring intentions are changing for the next one to two years. However, the vast majority of owners want to rent and the overall average implies a headcount increase of 30%. Most small business owners plan to hire additional employees in the next one to two years. However, from January 2022, a pattern is emerging where an increasing percentage of owners are planning to either make no additional hires or significantly increase headcount. The percentage of employers who now do not want to hire any more has increased by more than 37% since June and nearly tripled from January. On the other hand, approximately 21% of owners plan to hire eleven or more employees.

Survey questions: How many additional staff do you intend to hire in the next one to two years?
formula: Homebase Employee Pulse Survey.

27 percent of owners ranked the cost of raw materials or intermediate goods as the cost most affected by inflation. Gas prices were a close second (25%), followed by employee salary costs (18%). Electricity consumption (11%) and construction materials (6%) round out the top five. As one owner put it:

“Increased raw material prices, supply chain issues and shortages of many items, combined with now outstanding payments will have a major negative impact on my business.”

Survey questions: Which of your monthly expenses has been most affected by inflation?
formula: Homebase Employee Pulse Survey.

Most owners worry about a recession; They are also taking steps to prepare one. To prepare for a possible recession, employers are taking the same steps as their employees: First, they’re building savings (39%). Second, they are paying off debt (16%). Third, they are reducing workers’ work shifts (9%). Less than 0.5% of employers are laying off employees to prepare for a possible recession.

Survey questions: What steps, if any, are you taking to prepare for a recession?
formula: Homebase Employee Pulse Survey.

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