The Economy

Middle Market Companies Grow 6.1% in Q4

While a survey shows a decline in the growth rate from a year ago, 2015 as a whole was "a very strong year" for the middle market.
Katie Kuehner-HebertJanuary 27, 2016

Amid flattening job growth and lower confidence in economic trends, U.S. middle market companies reported stable growth to close out 2015, according to a new survey.

The National Center for the Middle Market said companies in that sector showed year-over-year growth of 6.1% in the fourth quarter, down from 7.2% in the third quarter. Employment grew 3.6% year-over-year compared to 4.1% the quarter before.

“Although we’re currently seeing a slowing down in revenue and job growth, as a whole 2015 was a very strong year for the middle market with company performance remaining at the same high level as it was at the end of 2014,” the center’s executive director Thomas A. Stewart said in a news release.

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“Middle market businesses are tempering hiring expectations because of declining confidence about economic conditions  particularly the global economy,” he said. “But they are preparing their business for growth in the year to come. To that end, many are making innovative changes and are investing in research and development.”

The survey of 1,000 middle market executives found that companies with the lowest revenue ($10 million to $50 million) had the largest slowdown in mean total revenue growth year-over-year, from 6.8% in the third quarter to 4.7% percent in the fourth quarter.

Half of middle market firms surveyed expected revenue growth in the coming year, which is up 1% from the third quarter. Only 32% of firms expect to increase workforce in the coming year, down from 36% in the third quarter and 52% in the fourth quarter of 2014.

Even as firms dilute their hiring expectations for the year ahead, expanding and improving on talent acquisition and retention is top of mind for middle market companies, Stewart said. Of the companies surveyed, 45% said employee retention is their top internal challenge. When asked about the most important area to focus on in terms of employment, 43% of firms cited wages, with an additional 34% citing the need to establish flexible working arrangements.

The National Center for the Middle Market is a partnership between GE Capital and the Ohio State University Fisher College of Business.