National Center for the Middle Market report suggests continued growth, more jobs and return of confidence among CEOs

Middle market expects to add 1 million new jobs in 2013; Healthcare costs and regulations persist as top challenges

Jan 23, 2013, 08:58 ET from National Center for the Middle Market

COLUMBUS, Ohio, Jan. 23, 2013 /PRNewswire/ -- The National Center for the Middle Market (NCMM) today announced that the U.S. middle market added an estimated $650 billion in new revenue and more than 1 million jobs in 2012 based on findings in the NCMM's 2012 fourth-quarter Middle Market Indicator. The report also concluded that the U.S. middle market – comprised of companies with revenue between $10 million and $1 billion – is poised to add an estimated $520 billion in new revenues and 1 million new jobs in 2013.

Conducted in December 2012, the quarterly survey of 1,000 CEOs, CFOs and other C-level executives across multiple industry sectors (construction, financial services/businesses, healthcare, manufacturing, retail trade, services and wholesale trade) hints at optimism among middle market leaders heading into the New Year. With nearly a third of the private sector Gross Domestic Product and employment in the U.S. contributed by this segment, such an outlook also bodes well for the national economy moving forward.

However, healthcare costs and ensuring compliance with regulations persist as key external barriers to growth, forcing middle market leaders to consider options to offset the issues.

"The fourth-quarter results for the middle market suggest a notable change in trends," said Dr. Anil Makhija, academic director of the NCMM. "The findings of this research point to the broader economy softly turning the corner after a year of mostly tepid GDP growth and, overall, we see positive changes in the Q4 survey that can be the basis of cautious optimism for the U.S. economy in 2013.

"However, it remains to be seen how healthcare regulations will be applied, what costs will be levied and what options middle market firms can effectively exploit in response," he added.

Revenue growth exceeded expectations in 2012; could again in 2013
Conducted in December 2012, the quarterly MMI found that U.S. middle-market businesses grew revenues at an average rate of 7 percent ($650 billion), surpassing revenue-growth expectations throughout the year (5.2 percent in Q1; 4.8 percent in Q2, 3.7 percent in Q3 and 5.2 percent in Q4).   

All sectors anticipate gains in the next 12 months, except for manufacturing, which is holding steady. Retailers are expecting the biggest revenue increase. In all, middle-market firms expect to see revenue grow 5.2 percent ($520 billion) in 2013.

Middle market firms added more than 1 million jobs in 2012
Middle market firms – approximately 200,000 in all – added an estimated 1.17 million jobs in 2012 based on a 2.7-percent reported growth in employment. Notably, small and large markets, comprised of an estimated 6 million firms, added an estimated 2.22 million jobs, showing the middle market is contributing more with less. The services industry showed the most growth, adding approximately 950,000 employees. Respondents anticipate adding 1 million more jobs in 2013.

Challenges remain
Healthcare costs and regulations persist as the biggest external challenges to success among all respondents irrespective of their size or sector. Nearly a third of respondents said they will make fewer investments in technology and operations as a result of healthcare reform.  The majority of firms (49 percent) are considering their options in terms of healthcare, as opposed to keeping the status quo or ignoring the pending reforms.  When asked how they are planning for healthcare reform, respondents ranked the top two options they are considering as renegotiating with current insurers (25 percent) and encouraging wellness efforts among employees (20 percent). 

Other top concerns expressed by respondents include their abilities to maintain margins, the rising cost of doing business, uncertainty about government actions and passing on commodities costs.

Confidence is low, but improving
While confidence remains depressed, the middle market is slowly becoming more optimistic about the global and U.S. economy. Of the firms surveyed, 25 percent said they were "somewhat confident" in the outlook for the global economy, while 8 percent are confident.  This is up significantly from the 2012 lows during the second quarter when just 17 percent of respondents said they were "somewhat confident" and only 5 percent said they were "confident."

The picture is even better for confidence in the U.S. economy with 36 percent of respondents "somewhat confident." Those who are confident in U.S. prospects rose to 15 percent, up from a 2012 low of 11 percent in the third quarter.

Capital investment is likely to pick up
Across industries, middle market companies are investing in their businesses instead of hoarding cash. From December's survey responses, 59 percent of respondents said they would invest extra money instead of holding it in reserve, up from 56 percent in the third quarter. Among the largest middle market companies, the most commonly cited use of cash was to make acquisitions. But smaller middle market companies said they planned to use the money for technology and capital expenditures.

***Note to editors: Dr. Anil Makhija is available for additional insights and interviews upon request.  Additionally, a video interview with Dr. Makhija and an infographic is available by clicking here.

Why the middle matters
The middle market is an engine of growth comprised of about 197,000 U.S. businesses with revenue between $10 million and $1 billion.  It accounted for a third of the nation's GDP and more than 44 million jobs, or 33 percent of U.S. private sector employment in 2012. If the middle market were a country, it would rank as the fourth-largest economy in the world, behind Japan and ahead of Germany.

The middle market has demonstrated resilience during the recent economic crisis, with 82 percent of middle market companies surviving the recession compared to 57 percent of small businesses.  Not only have middle market companies by and large escaped the recession, they have also continued to grow.

About the Middle Market Indicator/Methodology
The Middle Market Indicator (MMI) is a quarterly survey of 1,000 CEOs, CFOs and other C-level executives from a geographically balanced sample of leading middle market companies in the United States. The survey examines the health and outlook of middle market businesses by analyzing capabilities, performance, growth drivers and overall economic outlook. 

The MMI is published on the third Wednesday of the month following the quarter.  With no analysis previously available, the NCMM launched the MMI in Q1 of 2012 to provide insights and analysis on this critical component of the US economy.  The survey was designed to accurately reflect the 197,000 U.S. firms with revenues between $10MM and $1B, the upper and lower limits of middle market annual revenue.  It is conducted by independent research firm RTi on behalf of the National Center for the Middle Market, located at The Ohio State University Fisher College of Business. More survey information can be found at

About the National Center for Middle Market Research
Founded in 2011 in partnership with GE Capital and located at The Ohio State University Fisher College of Business, the National Center for the Middle Market is the leading source of knowledge, leadership and innovative research on the U.S. middle market economy.  Through research, corporate outreach activities and student engagement, the NCMM is dedicated to promoting job creation and growth in the middle market as well as driving the dialogue on this vital economic segment. For more information, please visit

SOURCE National Center for the Middle Market