WASHINGTON – A survey of chief executives shows fewer large U.S. companies plan to hire or boost spending in the next six months, reflecting a weaker U.S. economy.
The Business Roundtable says 36 per cent of its CEO members plan to add workers over the next six months. That’s down from 42 per cent when the survey was last taken three months ago.
Jim McNerney, the group’s chairman and CEO of The Boeing Co., blamed the dip in sentiment on “concern over increasingly persistent obstacles to a stronger recovery.” Those include uncertainty over potential U.S. tax increases and spending cuts early next year and Europe’s financial crisis.
Only 43 per cent say they plan to step up spending on machinery, computers and other large goods, down from 48 per cent. Most CEOs still expect sales to increase in the next six months.
Overall, the CEO Outlook survey index fell to 89.1 in the second quarter, down from 96.9 in the first three months of the year. Any reading above 50 indicates growth.
The gloomier outlook follows a sharp pullback in hiring over the past two months, which has raised concerns that the economy is slumping after a fast start. Job growth averaged only 73,000 in April and May, after average gains of 226,000 per month in the first three months of the year. The unemployment rate rose to 8.2 per cent in May from 8.1 per cent.
McNerney said that companies are delaying hiring, and even laying off workers, in anticipation of what many economists call the “fiscal cliff” that looms at the end of this year. Several large tax cuts are scheduled to expire and big spending cuts, including in defence, are set to take effect Jan. 1.
While President Barack Obama and lawmakers say they will delay the onset of the changes, McNerney said companies can’t be sure. Last year, Congress and the White House agreed only at the last minute to raise the government’s borrowing limit and stave off a possible default.
“We have yet to regain faith that the process will deal with it,” McNerney said.
As a result, “we don’t know how corporations, or individuals, or capital will be taxed,” he said. “That is having an impact on the results you see here.”
Boeing and many other aerospace companies with government contracts are holding back on hiring and are cutting jobs in anticipation of the spending cuts, he added.
The Business Roundtable represents the CEOs of the 200 largest U.S. corporations. The survey is based on 164 responses received between May 17 and June 8.