Business conditions in the US indicate a slowing economy, according to the “July 2022 NABE Business Conditions Survey” released today by the National Association for Business Economics. 

Nearly one-third of businesses now expect labor shortages at their firms to last until at least 2023.  

“Rising materials and labor costs are squeezing profit margins at many firms,” said NABE Business Conditions Survey Chair Jan Hogrefe, chief economist at Boeing Commercial Airplanes. “The July survey shows more firms reporting declining profit margins than rising margins for the first time since the October 2020 survey.”

Perceived recession risks are also rising among respondents.

“While a small majority still puts the chances of a recession in the next 12 months at less than 50-50, 43% of panelists rate a recession in that time as more likely than not, compared to 13% who held that view in the April survey,” Hogrefe said.

The share of respondents reporting rising profit margins at their firms declined to 22%, down from 26% in a similar survey in April. 

The survey also found that employment is increasing, with 38% reporting that employment is rising at a four-year high. However, they are less optimistic about the future, with only 24% expecting a rise in employment in the next three months, the smallest share since a similar survey was released in October 2020. 

Additionally, 52% of respondents reported shortages of skilled labor at their firms and 16% reported shortages of unskilled labor.

Overall, the respondents believe that the biggest downside risks to their firm’s outlook are increased cost pressures, cited by 31%; higher interest rates, 22%; rising Covid-19 cases, 12%; and supply chain, 10%. 

Other findings in the report:

• 47% of respondents reported sales at their firms increased in the second quarter.
• Wages decreased. Fifty-five percent of respondents reported that wages rose in the second quarter, down from 70% who said the same in the April survey.

Forty-three percent of respondents believe there’s more than a 50% chance of a recession occurring in the next 12 months, up from 13% who held the same view in April. The survey included responses from 58 NABE members and was conducted from July 5 to July 13. 

In a separate report, US Treasury Secretary Janet Yellen said on Sunday that US economic growth is slowing and acknowledged there was the risk of a recession but that a downturn was not inevitable, the Financial Express reported. In a press statement, Yellen said, “This is not an economy that is in recession, but we're in a period of transition in which growth is slowing and that's necessary and appropriate.”