PNC Fall Economic Outlook Survey

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PNC Survey Shows Business Owner Optimism Soars To 21-Year Record High While Hiring Concerns Linger

PNC’s latest semi-annual survey of small and mid-sized businesses, which concluded Aug. 9, shows that business owner optimism about the outlook for their own businesses in the next six months has reached a 21-year high amid strong expectations for sales, profits and demand.


Despite PNC economists’ predictions for a shallow recession starting in early 2024, business leaders’ outlook about their own companies has risen sharply this fall, with over three-quarters (77%) feeling highly optimistic compared to 49% a year ago and 60% in the spring. In addition, owners’ outlooks for the national, local and global economies have also improved significantly. Almost half (47%) are highly optimistic about the local economy, compared to 29% last fall. About a third (34%) are highly optimistic about the national economy compared to 22% a year ago.

Hiring remains a challenge: Nine in 10 employers say they intend to hold steady on hiring with just 9% planning to increase their staffing and just 1% expecting layoffs. Among businesses looking to hire employees, one in three (35%) say it’s become harder to hire qualified employees over the past six months, similar to last spring (36%) and a year ago (39%). The most common reason employers say it has become harder to hire is that there are not enough applicants overall (49%). Other reasons cited are candidates’ lack of experience or skills (22%), high salary/benefit requirements (14%), and inability to meet legal/security requirements (6%).

Inflation Threat Eases Somewhat: As inflation has eased over the last year, so have owner’s expectations on raising prices. More than half (55%) of businesses say they expect to increase prices in the next six months, unchanged from last spring but significantly fewer than a year ago (63%). 

Main justifications for increasing customer prices have shifted somewhat. Favorable market conditions top the list (38%), but a growing number identify keeping up with rising labor costs (32% vs. 21% last spring). Nearly three in 10 (29%) report doing it to keep up with rising non-labor costs.

Fewer expect their price increases to be 5% or more as compared to last fall (25% vs. 36% in fall 2022) while 56% are expecting a more moderate raise of 3% to 4%, significantly up from a year ago (38%).  

The steady drumbeat of Federal Reserve rate hikes over the past year has caught the attention of business owners. Two-thirds (65%) of respondents expect Fed rate hikes to have an effect on their business over the next year, including 31% who say they anticipate rate increases will put pressure on profits.  


Seeking Artificial Intelligence: One in three business owners (33%) believe Artificial Intelligence (AI) applications could be useful to their business. AI relevance is highest for manufacturing businesses (47%). Among those who consider AI useful, more than four in 10 (44%) are already using AI applications, while 45% are evaluating or planning to implement applications in the next year or two.

Employee Strategies: One in three business owners (33%) expect to increase employee compensation, up from 24% in the spring but fewer than last fall (40%). More than four in 10 employers (43%) report increased compensation requirements among their workforce and 38% say the need for flexible hours or remote work has increased. Employers are taking a variety of measures to attract and retain employees: 35% have standardized flexible work options; 27% have changed benefit packages and 23% have standardized their hiring, promotion or compensation practices.

Flexibility Remains Top of Mind: Two-thirds (67%) of employers say flexible work arrangements are important to the business. Among those who have standardized flexible work options and consider flexible work arrangements important to their business, 60% say it helps attract and retain employees and 38% believe their policies enhance the reputation of the business.


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