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- iHaveNet.com: Economy
by Danielle Kurtzleben
CEOs have a much rosier outlook for the future than they did just three months ago...but don't count on a huge influx of new jobs just yet.
According to the CEO Economic Outlook Index from the Business Roundtable, the heads of large companies are much more bullish on the economy now than at the end of 2011. (The index, measured on a scale of -50 to 150, jumped from 77.9 in the final quarter of 2011 to the first quarter of 2012.) They also expect real GDP to grow by 2.3 percent this year, up from last quarter's estimate of 2.0.
But that doesn't mean they're all ready to hire. According to a Business Roundtable survey of 128 CEOs, just 42 percent expect to grow their payrolls, a 7 percentage point improvement over the last quarter. A nearly equal share, 43 percent, expect no change in hiring, while 16 percent expect a decrease.
The outlook is a bit improved for other spending: 48 percent expect an increase in capital spending. But these executives appear much more bullish on revenues. Fully 81 percent of CEOs expect sales to grow in the next six months, up 12 percentage points over the previous quarter.
The data suggest that hiring will continue, but it could be slow going.
"It looks as if the economy is not yet going fast enough to overcome productivity improvements and then begin significant new hiring on top of that," explains Jim McNerney,
Many other factors are hurdles to faster growth, says McNerney. Europe, for example, is now an ever-present threat to global growth, and some industries are having difficulty finding workers with the necessary skills. Rising gas prices could hit some businesses twice, forcing them to pay more for transportation, in addition to dampening consumer confidence and demand.
But according to John Engler, president of the Business Roundtable, another of the biggest barriers is Washington, which many business leaders often claim is to blame for firms' reluctance to hire.
"What if I'm in the defense sector looking at sequestration after the first of the year? Would I be hiring now or getting very worried?" he asks, pointing to heavy automatic defense cuts set to take place at the start of 2013. But those cuts are not yet entirely certain; budget proposals from both parties have proposed doing away with the proposed cap on defense spending.
He adds that action needs to be taken on nailing down exactly how the tax code might change. "At the end of this year more than 100 provisions of the tax code expired. If I'm a small business and my rate's going up at the end of the year, should I hire?"
CEOs may be feeling more confident for now, but American consumers are starting to feel more cautious, which could be a drag on economic momentum. According to the Conference Board's consumer confidence index, released yesterday, confidence slipped slightly, from 71.6 to 70.2 in February. It's just one measure, but it could portend further slides in Americans' outlook.
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CEOs Bullish on Economy but Will Wait and See on Jobs