The CEOs of American’s biggest companies are not in a hiring mood – and more of them say they expect to announce layoffs in the coming months.
Responding to a survey by the Business Roundtable, only about one-third of chief executives of the largest U.S. companies said they expect to hire more workers in the next six months, down sharply from about half who said so three months ago. And about a quarter said they expected to have to cut U.S. jobs in the next six months, more than double the 11 percent who had forecast that in the second quarter.
“It's reflecting all the uncertainty that's out there,” said John Engler, president of the group and former Republican governor of Michigan told CNBC. “There's so much, so much in the air
Start with the ongoing budget battles in Washington, which will likely bring more government budget cuts. If your company counts Uncle Sam as a customer, you can be pretty sure your business is at risk. Pending trade agreements could help boost sales – if they’re approved. If corporate taxes get overhauled, you could end up saving money. Or paying more.
Then there’s the European financial meltdown: if you export to the Eurozone, you’re looking at the prospects of smaller orders. Health care costs are rising, but until the Supreme Court decides whether the Obama administration’s health care plan is constitutional, you won’t know just how much it will cost to offer benefits to your next new hire.
The CEO’s surveyed also aren’t in much of a mood to spend more money on equipment. That business investment has been one of the main drivers of the growth in the economy this year. But only about a third said they plan to continue spending on machinery and computers. That's down from nearly two thirds three months ago.
Despite their increased pessimism, the leaders of the nation’s biggest companies still think the economy will manage to dodge a recession. The group's CEO Economic Outlook index – which dropped for a second consecutive quarter to 77.6, the lowest reading since the fourth quarter of 2009 – still held above 50, which indicates an outright economic contraction. The group’s average growth forecast pegs gross domestic product rising 1.8 percent this year, sharply lower than the 2.8 percent growth forecast in March
"It's not that it's fallen off a cliff, but it's moderated," said Boeing CEO Jim McNerney, the group’s chairman, referring to the CEOs' spending and hiring plans.
While they may have increasing doubts about the strength of the U.S. economy, most CEOs remain bullish on growth prospects for their own company. Some two thirds said they expect their companies' sales to rise over the next six months – down from 87 percent there months ago.
Part of that optimism may be tied to the hope that stronger sales will support higher stock prices.
"They have to be cheerleaders; that's part of their jobs. And it's part of our jobs to be professional skeptics," said Peter Klein, a senior portfolio manager at Fifth Third Asset Management in Cleveland. "There's a lot of denial that goes on until there's no more denial.”
The grim outlook for hiring by big companies is offset somewhat by the fact that most job growth in the United States comes from smaller and newer businesses. Those smaller companies were responsible for creating about two thirds of all private-sector jobs in the past decade, according to the Small Business Administration.
The survey polled 140 CEOs from Aug. 29 through Sept. 16.
A Business Roundtable survey reveals CEOs growing concerns about economic uncertainty, according to Jon Engler, the group's president.