Halfway through 2024, the U.S. middle market is still on an impressive roll. Measuring performance over the past three years has brought record-high growth rates, both top-line revenues as well as employment. The growth is across the board, with most industries and middle market companies of all sizes doing well despite numerous challenges.
Through the interest of our partners at Visa, we’ve also started collecting data from Canadian companies in order to make comparisons across the northern border as well as develop a more comprehensive North American view. Those insights will be rolling out over the balance of the year. While the Center remains focused on the U.S. middle market, we’ve noted that most cross-border activity for these companies takes place with organizations in Canada and Mexico, so these insights are important to understand.
An uncertain business environment
Several factors persist in driving uncertainty in the marketplace. Two major wars continue in Eastern Europe and the Middle East, and while these conflicts do not directly negatively impact most middle market companies, the situation creates unease. Inflation has continued to come under control for many sectors, commodities and supplies, which should help control the cost of doing business, although interest rates remain high for accessing capital to fund growth. The country also faces a national election in November, which contributes to a “wait-and-see” mentality around policy, regulations and so forth.
Finding, developing and keeping employees
In the latest MMI, 92% of companies say they face some degree of challenge finding employees with the proper skills to help support growth. This is not a new phenomenon; since 2015, talent has been one of the top two challenges cited by the middle market. Finding the right people is the starting point after which motivating them, developing them with training and upskilling, and thinking about competitive wages and benefits all become key challenges for companies to address.
Some direct quotes from leaders voicing their top talent concerns:
- “Hiring enough HR staff to train our workers in an uncertain global environment”
- “Workforce – the ability to find them, hire them, keep them and pay them”
- “Finding workers who want to work”
Wages, on average, have increased by 5.6% across the middle market. While 55% of companies are primarily in-person (with variation across industries), the balance are still working to understand the proper hybrid set-up for their business. Only 3% say they are completely remote, and this subset operates in service and tech industries almost exclusively. As the Center has noted through previous research, building and fostering a strong employer brand and employee value proposition as well as communicating those openly are helpful strategies for addressing some of these challenges.
Climate change is a factor
For the first time in the MMI survey, the Center asked a series of questions around climate and particularly the associated risks to the business. Nearly half of all businesses say they are extremely or very concerned about the risks that climate poses to their operations. The primary issues are severe weather, potential disruptions to the supply chain and pollution/emissions concerns. As a result of these issues, 63% say climate plays a role in determining where they manufacture and distribute products.
There are technologies in place to mitigate some of these challenges. The use of renewable and solar energy tops the list, with 44% of companies already leveraging these resources. Renewable natural gas, electric and hybrid vehicle fleets, and alternative fuels are other approaches in place at middle market businesses. These strategies are becoming increasingly important; nearly one-third of companies have experienced negative consequences due to a climate issue, resulting in declines in productivity as well as operational delays and, in some cases, sales declines, signaling that businesses will have to continue finding ways to mitigate risks.