Midsized firms offer a beacon of light in the Sunshine State
All signs point to job creation in Florida. Florida’s economy continues to flourish, with the most recent employment statistics illustrating more than three years of positive job growth. Further signs of a rebound are evident as unemployment across the state has fallen to lows not experienced since the 2008 economic crisis, and it is currently outpacing the national average.
And if that’s not reason enough to be optimistic about the Sunshine State’s economic prospects, a burgeoning sector of Florida’s economy known as the middle market is radiating an even brighter projection of increased growth for the year ahead. These midsized firms, which consist of more than 6,100 Florida businesses generating $229 billion in revenue, employ roughly 1.9 million Floridians statewide and are integral to the economic recovery Florida has witnessed over the past several years.
Defined as companies with annual revenue between $10 million and $1 billion, the middle market includes a variety of businesses across the state — in a variety of sectors such as restaurants, retail and hospitality. These sectors include brands that have flourished into household names: The Melting Pot, Firehouse Subs and Tervis Tumbler, for example. Of the approximately 200,000 middle-market companies nationwide, more than 5 percent are based in Florida, extending from Jacksonville to Miami.
Despite its continued resilience, relatively little is understood about the nation’s middle market. These unique companies exist outside the purview of the Small Business Administration as well as the aggregators of large company data like the Securities and Exchange Commission or stock market indices like the S&P 500. It was this lack of data from the middle market that led to the establishment of the National Center for the Middle Market, which is a result of a 2011 partnership between GE Capital and Ohio State University’s Fisher College of Business.
In our first two years, we’ve learned the performance of the middle market is more complex than simply averaging big and small company performance in the U.S. During the most recent recession, middlemarket companies were adding jobs, while large firms were shedding them. These niche midsized organizations created more than 2.2 million jobs, while large companies shed more than 3 million.
And in the past 12 months, these companies have created 1.2 million jobs and are projected to generate 70 percent of all new jobs in the country this year. As it turns out, the middle market is America’s quiet yet unsung hero, acting as a critical growth engine as our economy continues to recover.
According to our latest quarterly analysis of middle-market performance, the Middle Market Indicator, we expect these trends to continue. Over the past 12 months, the revenues of midmarket companies across the U.S. have grown at a rate of 5.5 percent, which is more than eight times the rate of an average S&P 500 company.
Economic confidence has also improved significantly in the past 12 months as companies are finding it easier to maintain margins and access capital.
But beneath the surface of continued quarters of strong performance, the third quarter’s MMIrevealed a softening of future employment, revenue, investment and confidence projections. Confidence in the local, national, and global economies is stalling after successive gains that peaked in the second quarter. And if these trends continue, the consequences could be significant for employment in Florida in 2014.
More than eight out of 10 middle-market executives tell us the cause for pause is driven by uncertainty over the impact that government actions will have on their businesses. Within the past year, markets have been roiled by the uncertainties arising out of the fiscal cliff, sequestration, government shutdown and the threat of default on the government’s debts.
The good news is that growth and confidence projections remain stable in the middle market, creating ample opportunity to address some of the avoidable growth barriers at the state and federal levels.
Just think, if the middle market was able to hold its own during the Great Recession without policy consideration or monitoring, what kind of growth could be unleashed with a little extra attention?