Gene Marks is a former columnist for The New York Times and The Washington Post. He now writes weekly on the economy, business, and technology for The Guardian, The Hill, The Washington Times, The Philadelphia Inquirer, Forbes, and Entrepreneur.com. Gene, a certified public accountant, runs a financial and technology consulting firm outside Philadelphia and is the author of five books on business management. He provides commentary regularly on Fox News, MSNBC, Fox Business, CBS Radio, and for the Wharton School’s Business Channel on Sirius XM. Also, he’s the host of two popular business podcasts for The Hartford and Paychex.
All content herein represents the views and opinions of the author and does not represent the views or opinions of or endorsement by Toyota Material Handling, Inc. (“TMH”). Further, TMH does not make any representation or warranties with respect to the accuracy, applicability, fitness, or completeness of content. Content is for informational and educational purposes only and is not intended as financial or legal advice, and you should consult your advisors. Links to external third-party sites do not constitute endorsement by TMH of the linked websites or the information, products, or services contained therein.”
As business owners and managers, it’s our responsibility to keep an eye on where the economy is going so that we can make the right investment, spending, and hiring decisions.
Many parts of the economy impact the material handling industry, so diversify and keep an eye on other types of businesses. No one says you have to be a full-time economist, but my best and smartest clients always track a few key metrics monthly to make sure they’re aware of the trends.
Some reported GDP or unemployment data may be reported with a focus on a particular attribute or opinion. So, we may want to consider including the following “lesser known” economic metrics as part of our ongoing analysis:
ISM Manufacturing and ISM Service
The Institute for Supply Management is an association of purchasing managers who work in both the manufacturing and service industries. So, what better way to gauge the economy than to find out how much they’re buying? Each month, the ISM polls its members for specific data about their business, specifically their purchase and ordering plans, and then publishes their results in a closely watched report called the ISM Report on Business. Because of their methodology and the cross-section of respondents, it’s an excellent way to gauge activity in both the manufacturing and service sectors. According to their most recent reports, manufacturing continues to show contraction while the service industries have been in a healthy growth mode for months.
NFIB Small Business Optimism
For over 30 years, the National Federation of Independent Businesses has been tracking the optimism of its members, and considering that small businesses make up half of the country’s GDP and employ half of our nation’s workers, their sentiment figures significantly into our economic growth. When small business owners are feeling good, they buy and hire. When they’re not, they don’t. According to the most recent survey, optimism has risen slightly but remains significantly below the highs we saw a few years ago. Small businesses are still struggling with stick inflation and tight labor. Big surprise, right?
ADP Employment Report and Paychex Small Business Employment Watch
Many economic reports, especially the ones from the government, are based on surveys. The methodology is time-tested and reliable, but whenever I can get real data, I prefer it. That’s why I very much prefer using both ADP and Paychex’s employment reports. Both payroll companies publish these reports monthly, and the numbers are based on the actual employees working with their actual customers. It’s real and reliable payroll data, and depending on the report you read, you’ll get a good idea of what, where, and how other companies like yours are compensating and hiring people. Bottom line: salaries are keeping pace with inflation, and hiring remains strong.
Dodge Momentum Construction Index
The DMI is a monthly measure of the initial report for nonresidential building projects in planning. The report is a leading indicator of construction spending for nonresidential buildings for a full year. It’s a great way to get a pulse on commercial construction, an industry that not only has an enormous impact on your business but on the economy at all. According to the most recent numbers, the index declined this past month but is not very far off its 15-year high. The index is prepared monthly by the Dodge Construction Network, an analytics firm covering the commercial construction industry.
TSA Travelers and Las Vegas Visitors
Every day, the Transportation Security Administration publishes the travelers through its airports and every month, the Las Vegas Convention and Visitors Authority publishes visitors to the city. The busier our travel industry is, the better our economy as both business and leisure travelers eat, drink, stay at hotels, and spend money wherever they are. That translates into products coming off the racks in warehouses around the country. According to the TSA, airport travel numbers have mostly surpassed pre-pandemic levels, and the most recent report from Vegas shows that although convention traffic is down slightly, visitors are up. It’s not great for people who don’t like to wait in lines or endure flight delays. But it’s good for the economy.
Baltic Dry Index
America does not live in isolation, and the world economy impacts your customers’ inventory levels. So what’s the way to figure out how the world is doing? The Baltic Dry Index is a measure of freight through the Baltic Sea. When the cost of freight rises, that indicates more demand and, therefore, more shipping, which is a good economic sign. But the opposite means things are reversing. If you look at this chart you’ll see that the index – which has fluctuated greatly – is about at 2019 levels.
Remember, when you look at these numbers, never take one period in isolation. You have to look at them compared to prior periods to truly understand the trends. To do this, I recommend these three great economics sites below.
My best clients don’t operate their businesses in the dark. They check in on a few key macroeconomic metrics monthly to make sure they have an idea of where things are going. We should be doing the same.