Welcome to a new week; let’s look at market data!
According to the April ADP National Employment Report, small businesses gained 38,000 jobs nationally. Most job gains were in the South, and the leisure and hospitality industries saw an increase of 56,000 jobs. However, the information sector experienced a decrease of 4,000 jobs, possibly due to a skills mismatch and the impact of AI and automation. Pay gains for job changers also slowed in April.
The April Consumer Price Index showed a cooldown in inflation, reducing fears of reacceleration. In the 12 months through April, CPI rose 3.4%, a smaller gain than the 3.5% the prior month. Quoting Axios, “Core CPI, which excludes energy and food costs, rose 3.6% compared to 3.8% in March. Over the last three months, core CPI rose at an annualized rate of 4.1%. That’s down from 4.5% in March but still higher than that seen throughout the latter half of 2023 and far above the levels consistent with the Fed’s 2% inflation target.”
Retail sales in the US were flat in April, with the core control group actually falling by 0.3%. This suggests a cooling economy and a potential pullback in consumer spending, which aligns with the Fed’s desire to ease policy.
Canalys has found that global cloud spending increased by 21% in Q1, with AWS, Microsoft Azure, and Google Cloud accounting for 66% of total spending. The market is being driven by the convergence of AI and cloud, with customers focusing on AI integration and long-term commitments with hyperscalers. AI is also causing customers to reevaluate their technology stacks, presenting opportunities for the channel.
According to a report by Microsoft, sluggish adoption of AI in the UK could cost that economy £150 billion by 2035. However, prompt investment in digital technologies and skills could lead to an average societal ROI of more than 5:1 by 2025. The report identifies infrastructural issues, a lack of commercial awareness, and a shortage of skilled staff as key bottlenecks. Microsoft believes that strategic use of AI in the public sector could save £17 billion by 2035.
According to IDC market research, tech talent shortages will cost organizations $5.5 trillion by 2026, resulting in product delays, inability to compete, and loss of business. Skills gaps in IT operations, cloud architecture, data management, and software development have caused digital transformation delays for two-thirds of organizations. However, generative AI capabilities are helping to fill some of these gaps. IDC expects 9 in 10 organizations to be affected by talent shortages by 2026.
While on employment, The child care industry in the United States is facing a crisis, with more centers closing, tuition rising, and staffing shortages. Census data shows that the share of families without access to childcare has increased since the pandemic-era federal funding ran out. However, states that provided additional funding saw a smaller increase in the number of parents without child care.
The Russell 2000, a proxy for small business, is up from last week, specifically a jump on May 15. The S&P 600, which looks at the smallest companies, is roughly even, having seen the same spike but a slow cooling after
Why do we care?
Small businesses saw job gains, particularly in the South and leisure industries, while the information sector faces challenges due to impacts from AI and automation. Despite a cooling economy and tech talent shortages, opportunities exist for providers in AI integration, cloud spending, and addressing skills gaps to drive client growth and ROI.
For IT service providers, I want to highlight certain basics. Address skills mismatches, particularly in AI and automation. Emphasize the value and return on investment of IT services to clients. Capitalize on increased cloud spending and AI integration opportunities. And consider you may need to invest more in building talent than expecting it to walk in the front door.
Finally, owners have the opportunity to help with child care – I’ve covered this before and how it often breaks even or helps generate productivity when owners do so.
