September 24, 2019 – Growing geopolitical uncertainty, including U.S. trade policy and foreign retaliation, and slowing global economic growth, are among the reasons that CEO plans have waned, according to the newly released Business Roundtable “CEO Economic Outlook Survey.” The study is a composite of CEO plans for capital spending and hiring and expectations for sales over the next six months.
The CEO Economic Outlook Index decreased 10.3 points from last quarter to a value of 79.2, which falls below the index’s historical average of 82.7. While the lower index reading suggests some moderation in the pace of economic growth going forward, the index remains within growth territory.
“The U.S. needs strong, sustained long-term economic growth in order to remain globally competitive and expand opportunity for more Americans,” said Jamie Dimon, chairman and CEO of JPMorgan Chase and chairman of the Business Roundtable. “Business Roundtable CEOs stand ready to work with policymakers to address our nation’s biggest challenges to create conditions for inclusive growth, investment and job creation here in America.”
“This quarter’s survey shows American businesses now have their foot poised above the brake, and they’re tapping the brake periodically,” said Joshua Bolten, president and CEO of the Business Roundtable. “Uncertainty is preventing the full potential of the economy from being unleashed, limiting growth and investment here in the U.S.”
“Opening markets and promoting rules-based trade remains vital to U.S. economic prosperity,” he said. “Congress and the Administration have the immediate opportunity to come together and provide stability and growth to our economy by enacting the U.S.-Mexico-Canada Agreement.”
All three components of the Index decreased in the third quarter:
- CEO plans for hiring decreased 2.6 points to 72.6, which is higher than the employment sub‑index’s historical average of 58.5.
- CEO plans for capital investment decreased 14.7 points to 73.4, which is lower than the capital investment sub‑index’s historical average of 76.7.
- CEO expectations for sales decreased 13.5 points to 91.6, which is lower than the sales sub‑index’s historical average of 112.9.
In their fourth estimate of 2019 U.S. GDP growth, CEOs projected 2.3 percent growth for the year, which dropped 0.3 percentage point from last quarter’s estimate of 2.6 percent.
While the index looks at expectations for the next six months, Business Roundtable posed a special question this quarter asking CEOs to look back at the last 12 months and report how U.S. trade policy and retaliation from foreign nations has affected their businesses. Almost no CEOs reported a positive impact on their business.
- More than half of CEOs reported a somewhat or very negative impact on sales.
- One-third of CEOs reported a somewhat or very negative impact on hiring.
- One-fourth of all CEOs – and 40 percent of CEOs within the manufacturing sector – reported a somewhat or very negative effect on capex.
Search Experts Weigh In
“I do think the decline in CEO confidence is an indicator that there remains unease among the nation’s corporate leaders that a protracted trade war — not only with China, but with Europe, Canada and Mexico — will most certainly impact economic growth, and quite possibly bring it to a halt sooner rather than later,” said Dale Jones, CEO of Diversified Search.
And tariffs matter, he said. “In my conversations with CEOs, there seems to still be a wait-and-see attitude, and a feeling that if the parties can actually be brought to the table to hammer out new trade agreements, it could end up being quite advantageous to the U.S.,” Mr. Jones said. “However, that is far from a done deal. CEO confidence is likely to further erode if some positive movement is not seen soon, particularly when it comes to the global economy, where the tumult over Brexit is weighing on investors. If there is one constant in the economy, it is that investors hate uncertainty more than anything else.”
Despite continued low unemployment and first quarter job creation, Connor Caitlin Talent Solutions, for one, is witnessing a slowdown in hiring in certain segments, said Michael Muczyk, managing partner of the Medina, OH search firm. “The paint and coatings segment has slowed due to several factors including; industry consolidation, domestic automotive manufacturing, and weather. Other segments remain strong for now.”
Worker Confidence Rising
American worker confidence is at its highest level in four years. Following a slight dip at the end of the last quarter, the national Worker Confidence Index (WCI) rose 3.6 points to 110.7 in its most recent quarter, reaching its highest level since the study’s inception. The Worker Confidence Index is a survey of U.S. workers from HRO Today Magazine and Yoh, the international talent and outsourcing company owned by Day & Zimmermann, which gauges workers’ perceptions of the four key aspects of worker confidence: the perceived likelihood of job loss, the perceived likelihood of a promotion, the perceived likelihood of a raise and the perceived overall trust in company leadership.
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Overall, the index grew from 107.1 to 110.7. This is the third consecutive year in which the WCI set a record for its highest score to date. Of the WCI’s four indexes, the job security index was the only index to report a quarterly decrease. The remaining three – likelihood of a promotion, likelihood of a raise and trust in company leadership indices – all increased. On a year-over-year basis, all four indices increased for only the third time in study history.
Americans’ perceived likelihood of a promotion saw the biggest jump. Perceived likelihood of a raise saw the second-largest. Perceived job security and trust in company leadership saw minor falls and rises, respectively.
“While companies can be satisfied knowing their current employees are content in their roles, it does provide significant challenges in recruiting,” said Kathleen King, senior vice president, enterprise solutions for Yoh. “In times of low unemployment when a majority of employees are confident in their jobs and futures, it becomes more difficult than ever to attract new talent and recruit workers away from competitors.”
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“In order to retain and recruit high-performing, highly talented employees in today’s competitive market, organizations must take a proactive approach to recruiting and employee nurturing by augmenting their own recruiting and staffing efforts with talent partners who can help craft a recruiting strategy built for long term success,” she said.
Both men and women continue to feel more confident about getting a raise, with 36.5 percent of men and 25.8 percent of women anticipating a raise of at least three percent at their next review – leading to the highest recorded confidence in a raise since the study was created in 2015.
And while men continue to feel more confident in a promotion than women – a trend that has happened every quarter of the study – both genders felt more confident in a title change during the past quarter than they ever have in the history of the WCI. Respondents with annual incomes over $100,000 said they felt the most optimistic about the likelihood of promotion, with 29.1 percent believing a promotion was likely.
Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Managing Editor; Stephen Sawicki, Managing Editor; and Andrew W. Mitchell, Managing Editor – Hunt Scanlon Media