CEOs see less hiring due to gridlock worries
Washington • With political gridlock threatening the economy, a survey of CEOs in the U.S. shows a sharp drop in the number of large companies that plan to add jobs or hire more workers.
The Business Roundtable said Wednesday that only 29 percent of its member CEOs plan to increase hiring over the next six months. That's down from 36 percent in June, when the group last released its quarterly survey. It's also much lower than the 52 percent of CEOs in early 2011 who said they planned to boost hiring, which was the highest percentage since the survey began in 2002.
Jim McNerney, chairman of the Roundtable and CEO of The Boeing Co., said CEOs are worried about the impact of budget cuts and tax increases that are set to take effect at the start of next year. The pending U.S. budget changes are known as the "fiscal cliff." CEOs also are concerned about economic slowdowns in Europe and China.
The cliff "certainly throws cold water on long-term business planning," he said in a conference call with reporters.
Only 30 percent of CEOs expect to increase their investment in capital goods such as machinery, computers or other equipment. Companies usually buy such goods when they are expanding. That's down sharply from 43 percent three months ago.
Large-company CEOs are more pessimistic about their future sales and the overall U.S. economy, the survey found. Although 58 percent expect their sales to increase over the next six months, that's down from 75 percent in the June report. And the CEOs forecast the economy will expand just 1.9 percent this year, below their 2.1 percent forecast three months earlier.
McNerney said that when companies expect growth below 2 percent, "you're not adding jobs." Instead, they will simply push their work forces to be more productive.
The Roundtable's overall CEO Outlook index fell to 66, the lowest since the third quarter of 2009, when the economy was just emerging from recession. Any reading above 50 suggests the economy is expanding.
The negative impact of the fiscal cliff could be offset after the presidential election if Congress postponed the cuts and tax increases and agreed on a longer-term framework for reducing the deficit, McNerney said.
The downbeat view among CEOs is in contrast with a report Tuesday showing that consumers are more optimistic. The Conference Board's Consumer Confidence Index rose in September to its highest level in seven months. Rising home values and stock prices have boosted Americans' confidence that the economy will improve in the coming months. More people even expected hiring to pick up.
The Business Roundtable represents the CEOs of the 200 largest U.S. corporations. The survey results are based on 138 responses received from Aug. 30 to Sept. 14.
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