As a business owner, you constantly make decisions based on what’s happening in the broader economy. Will your customers keep spending? Should you raise prices? Is now the time to hire? These questions are at the heart of macroeconomics.
In this article, you’ll gain a clear picture of macroeconomics – from key economic indicators to emerging trends – and understand how these big-picture forces affect your business.
Macroeconomics definition: Macroeconomics studies how entire economies function nationally or globally. Its primary aim is to improve living standards through sustainable economic growth.
Large-scale economic forces shape how every business operates. For business owners, understanding what’s happening in the broader economy helps explain sudden changes in your costs, sales or ability to find workers and supplies.
For example, when the Federal Reserve raised interest rates sharply in 2022-2023 to control inflation, it showed the power of macroeconomic policy. Businesses faced higher borrowing costs and saw their customers spend less, forcing many companies to rethink their growth plans and strategies.
What’s the difference between macroeconomics and microeconomics?
Macroeconomics and microeconomics are two distinct branches of economics.
Macroeconomics looks at the economy as a whole, while microeconomics focuses on individual markets and business decisions.
For example, macroeconomics helps explain why unemployment is rising nationwide, while microeconomics looks at why a specific company needs to lay off workers.
Here are some examples of how they differ from each other.
Macroeconomics | Microeconomics |
Examines large-scale topics like:
| Includes smaller-scale topics like:
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3 essential macroeconomic indicators
When running your business, you must watch for major economic changes that could affect your plans.
Three aggregate measures, Gross Domestic Product (GDP), inflation and unemployment, can give early warnings about the economy’s direction.
1. How GDP signals market growth
Understanding GDP can help business owners make informed decisions, such as whether to scale or hold back, whether to take a risk on an investment and when to anticipate competitive pressures.
GDP is the total monetary value of all goods and services produced in a country within one year, serving as a key indicator of national income. For example, in 2023, the GDP of the United States was $27.36 trillion.
From cars manufactured in Detroit to software developed in Silicon Valley, from local small businesses to agricultural exports, GDP captures the entire scope of economic activity across the nation.
Just as doctors use vital signs to assess a patient’s condition, economists use GDP to determine a country’s economic health.
When GDP grows steadily, it usually means more jobs and a higher standard of living. As aggregate demand increases, businesses have opportunities to grow their customer base and revenue.
When GDP declines, it may signal tough times ahead. For businesses, this often means creating a contingency plan to prepare for reduced consumer spending.
Fluctuations can be sudden and significant, as businesses saw during the COVID-19 pandemic. In early 2020, GDP sharply dropped as businesses closed and demand plummeted.
As the economy recovered, many businesses adapted by moving online and finding new ways to serve customers.
2. How inflation affects your costs
Rising prices directly affect your day-to-day operations, from what you pay for supplies to how much your customers are willing to spend.
Inflation represents a general rise in prices throughout the economy over time. For example, if inflation is 3%, a product that cost $100 last year would cost $103 this year.
The Federal Reserve tracks inflation through the Consumer Price Index (CPI). The CPI measures price changes in a vast “basket” of goods and services Americans typically buy, from groceries and gasoline to medical care and housing costs. These price changes determine our inflation rate.
When inflation rises, you may face several business challenges, such as:
Your supplies and materials will cost more
You may need to raise wages to retain staff
You’ll likely need to adjust your prices while staying competitive
These challenges hit businesses hard during the “Great Inflation” of the 1970s and 1980s. Prices rose more than 14% in 1980, and businesses had to adjust their prices and plan constantly to keep up.
3. How unemployment data shapes your workforce
The unemployment rate tells businesses two important things: how easy it will be to find workers and if your customers have money to spend.
Employment statistics track how many people in a country are working or looking for work. Two key measures matter for your business:
The unemployment rate shows what percentage of job seekers can’t find work
The labor force participation rate reveals what portion of working-age adults are either employed or looking for work
When unemployment is around 4-5%, economists consider this normal, reflecting people changing jobs or relocating. Lower rates often mean a more competitive hiring environment, while higher rates typically signal economic challenges that could affect your business.
The early 2000s tech bubble burst shows how industry-specific shocks affect employment. When tech companies downsized, unemployment in tech hubs rose sharply.
Some companies in other sectors found they could hire skilled tech workers more easily, often at lower salaries. This indicator showed how labor market changes can create business challenges and opportunities.
Find the best new hires with this Sales Interview Checklist
How economic policy impacts your business
Policymakers use three main tools to manage economic conditions. These stabilization policies help governments smooth out economic ups and downs and affect your business differently.
Fiscal policy: Government spending and your tax bill
Fiscal policy is how the government uses its spending and taxation powers to influence the business cycle.
Think of it as controlling the amount of money flowing through the economy – when the government spends more or taxes less, it increases the flow of money. When it spends less or taxes more, it reduces this flow.
When the government increases spending, it often creates new business opportunities. For example, infrastructure projects create contracts for construction companies and their suppliers, while increased education funding can mean new contracts for training providers and education technology firms.
During tough times, tax cuts help you keep more cash to grow your business. Special tax credits can make training staff or developing new products cheaper, but when the government needs to reduce deficits, you may pay more taxes or lose some deductions.
Monetary policy: Interest rates and your growth plans
Monetary policy is how central banks (like the Federal Reserve) manage the economy’s money supply and interest rates. The decisions made by central banks ripple through financial markets, impacting everything from stock prices to bond yields and investment strategies.
Interest rate changes by the Federal Reserve directly affect your business finances in multiple ways. Higher rates mean your business loans and credit lines cost more, and your customers find it harder to finance purchases. However, your business savings will also earn more interest.
Since 2022, significantly higher interest rates have created a dilemma for business owners: keep more cash in savings accounts to earn attractive interest rates or push ahead with growth plans despite the higher cost of borrowing.
Even with some recent and expected rate cuts, rates remain well above pre-2022 levels, continuing to influence these business decisions.
Supply-side policies: Productivity and your growth potential
Supply-side policies focus on making businesses more productive and markets more efficient over the long term. Unlike fiscal and monetary policies that affect spending and money flow, these policies improve the foundations of how your business works.
For your business, these policies can create lasting benefits:
Infrastructure improvements like better roads or faster internet can reduce your operating costs and expand your market reach
Research and development support can help you improve your products or services
Government-funded workforce training programs can help you find skilled employees or develop your existing team’s capabilities
When business basics become easier and more efficient, entire industries can expand and boost economic development over time.
How to use macroeconomics to guide your business decisions
Macroeconomists aren’t the only ones who can use economic data to make decisions. Here are actionable ways to use macroeconomic principles to seize opportunities and protect against risks.
Adjust your business strategy to customer spending
Check GDP growth rates on the Federal Reserve website each quarter to see if customers will likely spend more or pull back.
When GDP is growing (above 2%), you might:
Launch that new product line you’ve been considering, as customers are more likely to try new things
Take out a business loan for expansion while customers are spending
Invest in better equipment or software to handle increased demand
When GDP starts shrinking, you might:
Hold off on big expenses and build up your emergency fund
Focus on marketing your most reliable products
Look for ways to cut costs without affecting quality, like finding cheaper suppliers or reducing waste
Download Your Sales and Marketing Strategy Guide
Plan pricing and costs around inflation trends
Check the CPI on the Bureau of Labor Statistics website each month, particularly the red “All items” column. It tells you how overall prices are changing across the economy, including everything your customers pay for.
When the CPI shows prices rising quickly (above 3%), you might:
Review your pricing more frequently
Add price adjustment clauses to your contracts with customers
Switch to shorter payment terms with suppliers
Consider stocking up on frequently-used supplies before prices rise further
When the CPI shows stable prices (below 3%), you might:
Offer longer-term price guarantees to win customer loyalty
Lock in extended contracts with suppliers at current prices
Focus on reducing costs to gain a competitive advantage
Also, check CPI categories that specifically affect your business, such as food, energy or housing, to see which costs might pressure it next.
Time your financing around interest rates
As part of its monetary policy, the Federal Reserve has eight meetings yearly to set interest rates (also known as the Fed fund rate). Major financial news outlets always report the outcome, or you can check the Federal Reserve website.
When interest rates are rising, you might:
Speed up planned borrowing before rates go higher
Focus on paying down existing variable-rate debt
Look for ways to improve cash flow instead of taking loans
Consider offering discounts to customers who pay early
When interest rates are falling, you might:
Start planning major purchases or expansions
Look into refinancing existing high-rate loans
Consider longer-term financing while rates are favorable
Take advantage of better borrowing terms for equipment or inventory
Match hiring plans to employment trends
Check the Bureau of Labor Statistics website for national and state unemployment rates, especially when planning for new hires.
When unemployment is low (below 4%), you might:
Move quickly on hiring decisions before talent gets scarcer
Review your compensation packages to stay competitive
Consider investing in training programs to develop existing staff
Look for ways to improve productivity as labor costs rise
When unemployment is rising (above 5%), you might:
Take advantage of a larger talent pool if you need to hire
Focus on retaining your best employees who might get nervous
Watch your overheads as customers may have less to spend
Consider upskilling your team while talent is available
Compare national trends with your local job market. This helps you decide whether you need to offer more competitive packages in your area or if you might find talent more easily than national headlines suggest.
Emerging trends in macroeconomics
Major changes in technology, climates and global trade are reshaping the global economy, creating new challenges and opportunities for businesses of all sizes.
The future of money
Payment technology is changing fast. For businesses doing international trade, digital currencies could cut the cost of overseas payments and speed up transactions.
Sending money abroad often means high bank fees and long waiting times. While cryptocurrencies might offer a cheaper option, their unpredictable value makes them too risky for most businesses.
Meanwhile, central banks are developing their own digital currencies. These could make it easier and cheaper for businesses to get paid and make payments, especially when dealing with customers and suppliers in different countries where exchange rates impact your costs.
Climate change and business adaptation
Climate change creates risks and opportunities for businesses. Extreme weather events can force unexpected closures, delay shipments and damage equipment.
Environmental regulations add another layer of cost, requiring businesses to upgrade machinery or change processes to meet new emissions standards.
However, transitioning to sustainable practices also creates opportunities for energy-saving innovations and new markets for green products and services.
Rethinking supply chains
Recent global disruptions have shown the dangers of relying on a single supplier or keeping minimal inventory. When one link in the supply chain breaks, the whole business can suffer.
Building a stronger supply chain might mean higher upfront costs, such as keeping more inventory on hand, setting up backup suppliers or moving production closer to home.
However, these changes in supply chain management can provide more stability and often result in faster delivery times for your customers.
How to use Pipedrive alongside macroeconomics to make better business decisions
Economic indicators give you the big picture, but Pipedrive shows you what’s happening in your business now. Combining these insights helps you make more informed decisions.
Use Pipedrive’s Insights and analytics dashboards to spot new opportunities in easy-to-read graphs and charts:
If your sales reports show strong growth and inflation is cooling, it might be the right time to plan expansion for next quarter
When your team’s performance metrics are strong, and unemployment is low, consider hiring more sales reps before competition for talent increases
Look for patterns between your sales cycles and economic trends to better time your growth decisions
Get organized with your free sales pipeline excel template
Final thoughts
Macroeconomics shapes every aspect of your business environment – from your daily operations to your long-term strategy. You can’t control these large-scale economic forces, but understanding them helps spot risks and opportunities early.
Pair your knowledge of economic trends with your business data using Pipedrive. It has customizable dashboards, automated insights and forecasting tools to help you transform your economic understanding into actionable business strategies. Try Pipedrive free for 14 days.
