If there’s one thing I’ve learned over the past 20 years is that the smartest business owners, leaders and executives are always…ALWAYS…looking ahead. They’re evaluating the things going on in the world today around them. Whether it’s politics, the economy, technology, workplace, legislation. And they’re making decisions based on these trends in order to best navigate their companies. So as we head into 2023 what are the biggest things on their minds?
Trend 1: The Economy in 2023 Will Be Slower for Some, Better for Others
There’s a lot of debate right now as to whether or not the U.S. economy is already in a recession or heading into one. The data is mixed.
The bad news is that interest rates are going up and inflation remains stubbornly high, both of which have a significant impact on both consumers and businesses. The real estate industry is facing a rising inventory of homes for sale amidst falling prices and a declining number of transactions closed since January. Manufacturing demand is down. Port activity and shipments are declining. Consumer and small business confidence levels have been plunging. The stock markets are off more than 20 percent since the beginning of the year. None of this is great news.
However, there are still bright spots. Retail sales, though flat, have remained at historic highs. E-commerce transactions also remain high. The nation’s largest banks have yet to see significant loan defaults. Business in the service, travel, leisure, restaurant and retail industries are going pretty strong. Household wealth remains elevated.
So what does this mean? It means whether or not you or your customers’ industry is in a recession really depends on what the industry is. And, it may depend on where they’re located and who your customers are. The trend is that most smart business leaders aren’t just assuming that the U.S. is in a recession in 2023. They’re evaluating the economic situation on more of a micro level this year.
Trend 2: Inflation and Supply Chain Issues Will Persist in 2023
Consumer prices are holding steady at a 8-9 percent increase year over year. But most of my clients aren’t paying as much attention to that number. That’s because the Consumer Price Index is a lagging indicator. The number that really gets their attention is the Producer Price Index. That’s the leading indicator of consumer prices to come. And that index remains elevated at about 8-9 percent too.
Unfortunately, many of my clients are actually seeing even higher producer prices. The annual increases in the cost of industrial chemicals, construction materials, steel piping, cotton, fertilizer, animal feed and machinery parts, let alone freight and shipping, have increased at a rate much higher than the 8-9 percent producer price index. Pay raises for many employees are averaging about 8 percent according to payroll firm data. Unfortunately, these trends are not reversing.
Some of this is caused by supply chain issues. Fiscal and federal policies are also contributing to the excessive liquidity in our financial systems, which cause an oversupply of money in circulation which is a factor of inflation. There are also significant pressures on energy prices thanks to the war in Ukraine. The good news is that, as the global economy slows down, many manufacturers are catching up on their production demands and shipping bottlenecks have eased. It’s also good that the Federal Reserve is raising interest rates, as painful as that may sound, because it’s truly the most effective method for reducing excess financial liquidity.
But the reality is that these things will take time. It took more than a year and a half for inflation to reach these levels and it’s going to take at least that amount of time for things to (hopefully) get back to more manageable amounts. That’s the trend, which means that business owners and managers can expect inflation to persist throughout most of 2023.
I recommend reading a blog post I wrote about the three strategies for how to navigate inflation for your business.
Trend 3: Labor and Workplace Rules and Attitudes Will Change the Way We Manage Our Employees
The Department of Labor has been very active in working on new rules that will better support workers. But they will also create more burdens for employers. What kinds of rules?
A new rule for worker classifications (i.e. independent contractors) and new rules for paying overtime wages in 2023. There’s a continued push to increase the national minimum wage. Efforts from the National Labor Relations Board are happening to ease the path for more unionization. There’s an increased push from the Equal Employment Opportunity Commission to better enforce workplace discrimination and harassment violations. Also, look for rules concerning pay transparency and non-compete clauses too, both in favor of workers.
Thanks to the pandemic, a lack of immigration policy and 10 million unfilled jobs, bolstered by the growing influence of both millennials and Gen Z workers, employers have had to look closely at their policies around working from home, paid time off, parental leave, dependent care as well as re-addressing the benefits they provide for mental health, healthcare and retirement.
The trend is the changing workplace. There are now at least three generations (Millennials, Gen Z and Gen X) that today’s baby boomers – who still comprise a large percentage of business owners – must manage and make happy. And each of these generations of workers have different priorities. Even the smallest of businesses must compete with large companies and government organizations for talent. And these same businesses are being forced to comply with more rules, which creates more challenges and potentially more headaches. That trend will continue to be important in 2023, particularly for companies looking to attract the best talent.
Business Trends in 2023
The economy. Inflation and supply chain. Workplace. These are the challenges that will be taking up much of a business leader’s day during 2023. None of these issues are easy. But we are figuring it out together. Finding a technology partner like Right Networks is going to be helpful, especially when it comes to operating your business in the cloud.