Economic Outlook for Minority, Women and Nonminority Businesses in 2012

A summary of the 2012 outlook for small businesses owned by minority, women and non-minority CEOs is provided below.  The results are based on the Gazelle Index national random survey of over 600 CEOs who operated businesses with 10 to 100 employees.

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Economic Situation Summary

  • After three years of growth, the private sector has reemployed 3.1 million of the 7.5 million persons who lost jobs during the recession. A big problem is that the expansion has not occurred along a straight upward trend line, but rather in a cyclical, wavelike pattern.
  • The cyclical pattern reflects the lack of coordination among different sectors of the economy as they recover. That is, private investment, consumer spending and government spending have not proceeded together. Instead, when one is up, the other has been down.
  • Economists are searching for signs that the existing weakness in the economy is a temporary interruption of growth, rather than a long-run trend. However, the economy has not exhibited signs of renewed growth.
  • Hiring in small and start-up businesses is the key to a labor-market recovery, but too often small businesses are viewed within a vacuum. They are sustained by a food chain that is comprised of retail spending of consumers, business-to-business purchasing, corporate supply chain operations and government procurement. If there is a gap in one of those links, small business hiring will suffer.
  • Government fiscal austerity measures and declining corporate fixed investment are adversely affecting small businesses and particular minority-owned businesses. This is because minority firms depend more heavily on government contracting opportunities than do non-minority-owned businesses.

Industry Distribution

  • In 2011, the industry distribution of small businesses in the Gazelle Index survey population differed by race and gender. The largest percentage of Asian firms was concentrated in food, entertainment and hospitality (27.4%).
  • For African-Americans; the largest percentage was in professional and technical services (15.5%) followed by business services (13.7%).
  • Among Latinos; the greatest percentage was in construction (14.1%) followed by manufacturing (11.9%).
  • Among white males; the greatest percentage was in health, education and social services (18.5%) followed by food and entertainment (13.4%).
  • Finally; white women were most heavily concentrated in food and entertainment (12.5%) followed by health, education and social services (12.2%).

Regional Distribution

  • Regionally, most Asian owned firms were located in the West (46.6%) and the North East (29.9%).
  • For blacks; the largest percentage was concentrated in the South (59.1%) followed by the Midwest (17.6%).
  • Latinos were most heavily concentrated in the South (47.3%) and in the West (33.7%).
  • Firms owned by white females were most heavily concentrated in the South (37.3%) and in the West (23.7%).

Importance of Government Contracting and B2B Sales

  • The Gazelle Index survey asked CEOs to indicate the factors that were vital to achieving their overall business objectives. The percentages of each race and gender group which said government procurement opportunities are “very important” were as follows: Black 52.7%; Latino 48.4%; Women 37.4%; Whites 20.8%.
  • When asked how important business-to-business sales are, the percentages that said B2B sales are “very important” were as follows: Women 74.7%; Black 64.2%; Latino 57.3%; Whites 54.2%.

Outlook and Hiring Plans

  • Businesses owned by Latinos were the hardest hit by the recession. Overall, 55% reduced their workforce and but 26%cut by more than one-half.
  • Black CEOs expressed the greatest optimism about the future, and they plan to engage in the most hiring in 2012.
  • Latino businesses stood out because only 20% plan to increase hiring in 2012, while 17.6% will decrease employment.
  • Overall more small businesses plan to add workers than to cut workers (a net difference of 12.3%).
  • The industries where the largest net increase in hiring will occur are information technology (43.2%), management and administrative services (31.3%), health and education (18.3%), wholesale 16.3%), and construction (14.2%).
  • Regionally, black business hiring will be strongest in the Northeast, where 43.8% of businesses intend to add workers while only 6.2% will cut payrolls.
  • Women CEOs plan to increase hiring in 2012. Based on the national survey, 26.1% of women-owned businesses will increase hiring in 2012 while only 13.3% will decrease hiring. Hiring by women-owned businesses will be strongest in the South.
  • According to the Gazelle Index, a majority of small-business owners are now more positive than they are negative about current and future business conditions and will increase hiring over the next three months.
  • Although business activity has not fully recovered from the recession, owners’ confidence is increasing, and they will increase future hiring.

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