Business Barriers: The Challenges Facing Fourth District Firms

Overview

Each year, the 12 Federal Reserve Banks survey firms with fewer than 500 employees and publish a national report and chartbooks breaking out data by region and other categories. In 2023, the SBCS team published data for two states, Ohio and Pennsylvania, in the Fourth District, which is served by the Cleveland Fed. Moreover, for the first time, the team collected enough responses from the Cleveland–Elyria MSA for its data to be published.¹ The data shed light on the challenges (Figure 1) faced by Fourth District firms and how these firms have responded (Figure 2), providing insight into the health of the regional economy.

Key Takeaways

• Challenges with rising costs and supply chains, two prominent issues through the COVID-19 pandemic, persisted for Ohio small businesses in 2023. The share of Ohio firms that reported rising costs as a financial challenge in 2023 (85 percent) exceeded the national average (77 percent). The proportion of Ohio firms that struggled with supply chain issues (51 percent) was also above the national average (41 percent). Ohio firms were more likely than their counterparts nationally to raise prices in response to financial challenges and were less likely to turn to using owners’ personal funds (Figures 1 and 2). The 2023 SBCS also indicated that Ohio firms were less likely than their national counterparts to downsize in response to financial challenges.
• Compared to small businesses across Ohio, those in Cleveland faced similar financial and operational challenges in 2023 but were less likely to use cash reserves in response to financial challenges. Firms in Cleveland, like those throughout Ohio, most frequently reported rising costs of goods, services, and wages as challenges they faced in 2023. To respond to financial challenges, half of Cleveland respondents and 56 percent of Ohio respondents reported using cash reserves (Figures 1 and 2). A quarter of Cleveland businesses that experienced financial challenges said they made a late payment or missed a payment as a result.
• Among operational challenges, hiring issues were top of mind for small business owners in Pennsylvania in 2023. Fifty-nine percent of SBCS respondents from Pennsylvania reported challenges with hiring or retaining qualified staff in 2023; this was the most frequently reported operational challenge among Pennsylvania firms (Figure 1).