More CEOs Expect to Cut Jobs Over Next Six Months
America’s CEOs are just as worried now as they were three years ago, and lawmakers bear a large part of the blame.
According to a new survey of CEOs from Business Roundtable, chief executives’ outlook is as poor as it has been since the third quarter of 2009, just after the end of the Great Recession. The group’s Economic Outlook Survey Index, which measures CEOs’ expectations for sales, spending, and employment over the next half year, fell by its third-largest margin in the survey’s history, from 89.1 in the second quarter of this year to 66.0 in the third quarter of this year. CEOs also reduced their outlook for 2012 GDP growth, from 2.1 percent to 1.9 percent.
According to Jim McNerney, chairman of the Business Roundtable and CEO of the Boeing Company, the darkening outlook is due to economic hardship in Europe and China, but also uncertainties in domestic fiscal policy, including the spending cuts and tax hikes scheduled for the end of the year.
“The so-called fiscal cliff and the uncertainty attendant to it certainly is cold water on long-term planning” for American businesses, McNerney said in a call with reporters today.
Together, those factors have delivered a one-two punch of problems to American businesses. Policy uncertainty is affecting businesses’ investment and employment, said McNerney, while Europe and China are simultaneously helping to pull back on demand.
The CEOs’ decline in confidence comes alongside a worsening employment outlook. Thirty-four percent of the 138 CEOs surveyed said in this quarter’s survey that they expected their companies to cut jobs in the next six months, compared to just 20 percent in the second quarter. Likewise, only 29 percent say they expect employment to grow in the next half year, down from 36 percent last quarter.
After the election, Congress will reconvene to consider its options on the fiscal cliff. Exactly how much relief that will spell for American businesses depends entirely upon what that fix looks like, McNerney said. There is some speculation that members might create a short-term fix, leaving a longer-term solution to the next Congress.
Even a short-term fix could create more security and clarity for businesses, McNerney said.
“There could be a continuing resolution that has some commitments to cost takeouts in the government as well as some revenue raisers,” he said. “If it’s just a ‘kick the can down the road’ without that kind of framework, I think it’s continued purgatory and uncertainty.”
“This is like the same problem the NFL is having,” added John Engler, president of Business Roundtable. “The players are not quite clear on how to play the game because the refereeing is so bad. Well, if the legislating is so bad, how do you play the game on taxes and regulations?”
At the very least, the survey contains a bright spot in its 66.0 index reading, which is on a scale of minus 50 to 150. A reading above 50 signals economic expansion, meaning that the latest survey reflects continued economic growth, however slow.