Mid-Michigan small businesses trying to find right balance as pandemic persists

Jim Wheeler, president of Greater Gratiot Development Inc., said the biggest challenge for small businesses right now is a lack of employees.

Statewide, hiring, retaining workers, and increasing product costs are the biggest challenges small business owners are dealing with right now as state-mandated pandemic restrictions have come and gone. It’s now being left up to individual business owners to decide how to best navigate this pandemic for themselves, their employees, and their customers.

Wheeler said Gratiot County has a fairly robust base of manufacturers that have been negatively impacted by supply chain disruptions.

Jim Wheeler, president of the Greater Gratiot Development Inc. (provided)

Between January and March, Clare, Gratiot, and Clare county’s total employment increased from 41,988 to 43,814, a 4.3% increase. The number is still down from 47,309 in March 2019 and 46,584 in March 2020.

“This has been creating delays for the different manufacturing companies,” he said. “The continual changing environment of COVID-19 is also impacting our businesses. Things are not back to normal. It’s also about what businesses can and cannot do along those lines that’s affecting them.”

With hiring continuing to be the greatest challenge for business in mid-Michigan, Wheeler said it’s important to continue to make efforts to keep talent from going somewhere else.

“How we retain our employees is the big thing,” he said. I’ve always said you don’t drive through Michigan, you drive to Michigan. How do we retain people as far as raising them here and keeping them? This goes back to skilled-work that pays good wages and developing relationships with schools for students to be able to find good jobs and opportunities for them.”

According to Bureau of Labor Statistics (BLS) data, employment is increasing across all Michigan industries, but still below pre-pandemic levels. As of July 2021, statewide employment totaled 4,487,565 while the labor force totaled 4,715,003. Both numbers are down from 2019 around 5.4% and 4.8% respectively.

The state’s labor force participation rate, the percentage of Michigan’s population that is employed or actively seeking work, was 59% in July, down from 62% in July 2019. The issue remains not the number of jobs available, which stood at 1.1 million nationwide in July, an increase from 713,700 available jobs in July 2019, but the slow trickle of people entering the workforce and the number of people leaving.

In July, 397,700 American workers quit their jobs, the highest of any month since at least December 2000, according to the BLS. The number of hires made totaled 666,700 nationwide.

The state’s leisure and hospitality sector has been very slow to bounce back with 391,200 workers employed statewide in July, still down from July 2019 when the number totaled 460,900 workers.

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Compared to March 2020, wages increased, on average, 6.5% in March 2021 for Michigan businesses with fewer than 100 employees, according to March 2021 BLS data, the most recent available. The average change in employment for businesses with 10-99 employees was a decrease of 5.4%.

Statewide, Brian Calley, president of the Small Business Association of Michigan, said lack of available employees, rising costs, and supply chain disruptions continue to be the biggest challenges facing the state’s small business community.

He believes that it’s important for businesses to prioritize and balance staffing levels and hours to ensure they can continue to provide a high-level of service when they are open. He added that businesses should not try to do too much with the employees they do have, which could lead to burnout.

“There’s only so much you can ask of the workers,” he said. “Tensions are higher and customer service is more challenging than it has been in the past. There’s an apprehension to trying to stretch your staff too thin, even if they are willing, in order to make sure businesses are not creating an environment where there is a big incentive to go find something easier to do.”

For someone who oversees a statewide organization with 28,000 small business members, Calley believes that the economic recovery can be described as uneven with some industries bouncing back better than others. He added that the recovery will be uneven for a while.

The professional and business services, and construction industries have recovered nicely, said Calley, but the small, independent retail, leisure and hospitality industries haven’t been as lucky in terms of the number of jobs recovered.

From July 2019 to July 2020, the state’s professional and business services industry lost 64,600 workers from 643,400 to 578,800. As of July 2021, the number of workers stood at 621,800.

Michigan’s construction workforce totaled 188,000 in July, which is actually 2,000 more than the July 2019 levels.

“The vertical line of business has a lot to do with the rate of recovery,” he said. “In manufacturing, it’s really about supply chain component disruption challenges. In hospitality, it’s about people being comfortable enough to go out. Those are challenges that are in many ways outside of the business owners’ control with the recovery process having been that much more difficult…There are some industries fully recovered and some who aren’t even close.”

Although statewide pandemic restrictions around capacity, hours, and masks have been lifted, giving business owners freedom to respond how they want to to the pandemic, it’s those external challenges outside the realm of their control that have been very frustrating for many business owners across all industries.

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Industries that rely on front-facing foot traffic for their success are struggling more than others and surrounded with more uncertainty. This includes retail, restaurants, lodging, and entertainment who were the last to reopen and the last to bring back employees in person.

Justin Winslow, president and CEO of the Michigan Restaurant and Lodging Association (MRLA), said challenges for the industry are a three-headed monster right now with staffing top of mind along with increasing commodity prices and the resurgence of the pandemic.

He said businesses are trying to meet pre-pandemic customer demand with 100,000 fewer workers as labor and product prices skyrocket. He added that these persisting challenges are just as or more severe than during the early stages of the pandemic.

In August, the MRLA released results of a recent statewide hospitality industry survey to better understand the challenges and opportunities facing the industry nearly two months after statewide COVID-19 restrictions were lifted.

“Just shy of 90% of full-service restaurant operators reported closing early during the day as a direct result of inadequate staffing to meet demand,” said Winslow. “Restaurants just cannot find workers no matter how much they are paying and what other incentives they are offering to meet that demand. I think burnout is very real and it’s why you are seeing diminished hours.”

Although restaurants are doing what they can to survive in the immediate term, including increasing wages to attract workers, decreasing hours, and cutting menu items, those aren’t “long-term strategies for success.”

“When restrictions went away, (restaurants) needed to capitalize on that demand that was there so they paid people in absurd amounts to make sure that they were staffed in a non-sustainable fashion. Now that we’re past that peak summer surge, your overhead costs are now exceeding your ability to generate revenue and you are in a dangerous place.”

The report also revealed that 9 in 10 Michigan restaurants and nearly every hotel is operating with inadequate staffing to meet consumer demand.

“Even for restaurants that are doing great on sales, how are they doing on profit margin?,” he said. “Because profitability has been a real challenge. Even the most successful restaurants in terms of guests have been struggling on the profitability side.”

With all of these new challenges, it’s unclear for many Michigan businesses owners when things will ever return to normal or if the new normal is here to stay.

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