An economic recovery may be underway, but leaders of the nation's largest corporations are standing pat on spending money and hiring. A survey released this week shows that although chief executives expect increased sales in the next six months, they don't see enough demand to translate into greater capital expenditures or more jobs, according to the latest poll of CEOs by the Business Roundtable.
"Businesses depend on increased demand to drive capital investment and hiring," said Ivan G. Seidenberg, chairman of Business Roundtable, and chairman and CEO of Verizon Communications (VZ). "Right now, we're beginning to see sales trending up, but not to the level that translates into meaningful gains in capital spending or jobs."
The survey, taken earlier this month of roughly 160 of the biggest corporations in the U.S., showed 51 percent of CEOs expected sales to ramp up during the next half year, while 23 percent anticipated no change and 26 percent predicted a decline. But when it came to hiring, only 13 percent of business chiefs expected to increase employment during the next six months. Forty-seven percent expected their payrolls to remain static, and 40 percent anticipated job cuts.
While that may seem gloomy, the chief executives' thoughts on hiring represent an improvement from the second quarter, when just 6 percent anticipated hiring more workers and 49 percent expected to cut jobs.
"This quarter's numbers show an economy in transition," Seidenberg said in a statement. "As the Federal Reserve cautioned this month, unemployment is likely to remain stubbornly high as our nation emerges from recession."
When it comes to capital spending, outlays that result in new buildings, equipment and other long-term priorities, just 21 percent of CEOs said they expect to increase such spending, while 44 percent saw no change and 35 percent anticipated decreases.
As with hiring, those results were an improvement from the second quarter, when just 12 percent of CEOs foresaw increased capital spending and 51 percent forecast decreases.
Looking at the U.S. economy as whole, the survey showed corporate leaders estimate that real gross domestic product will fall 0.9 percent this year, an improvement over CEOs' second-quarter estimate of a contraction of 2.1 percent.
The Business Roundtable's quarterly CEO Economic Outlook Index climbed to 44.9 percent in the third quarter, a jump from 18.5 percent in the second quarter, but still below 50 percent, which divides growth and contraction in the economy. The index has shown negative growth for the last year. It hit its low point in the first quarter of this year with a reading of -5.
With jobs still at a premium in the economy, the likelihood of robust economic growth remains in doubt. Consumers drive the majority of economic activity in the U.S., which is directly tied to the numbers of people working and spending money.
Members of the Business Roundtable were surveyed Sept. 2 to Sept. 18. Their companies employ more than 10 million people and collectively generate more than $5 trillion in annual revenue.
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