CFO/Duke University Survey Paints Different Picture Than Federal Reserve
Posted by Larry Doyle on December 17, 2009 9:24 AM |
A recently released survey of CFOs paints a decidedly different picture on the jobs front than that portrayed in yesterday’s Federal Reserve release. Let’s compare, contrast, and navigate the most important trail on our economic landscape.
The Federal Reserve’s statement yesterday:
Information received since the Federal Open Market Committee met in November suggests that economic activity has continued to pick up and that the deterioration in the labor market is abating. The housing sector has shown some signs of improvement over recent months. Household spending appears to be expanding at a moderate rate, though it remains constrained by a weak labor market, modest income growth, lower housing wealth, and tight credit. Businesses are still cutting back on fixed investment, though at a slower pace, and remain reluctant to add to payrolls;
In every report that I have read and heard, this statement has been portrayed as one in which the employment situation is improving. I am an optimist by nature, but one has to spin that statement very hard to view it as a sanguine outlook for jobs.
Chief financial officers expect business conditions to improve in 2010, but U.S. and European chief financial officers say their companies will continue reducing their workforces in the coming months.
While economists, analysts, brokers, and media may very well like to promote losing fewer jobs as an improvement, that line doesn’t work for the 17.2% of Americans underemployed. The unfortunate in that crowd want ‘absolute’ job growth not a ‘relative’ lessened decline.
The CFO/Duke survey provides a wealth of great information, including:
SUMMARY OF FINDINGS
— CFO optimism has improved from recession lows, but remains below long-run averages, and U.S. optimism lags behind the rest of the world
— U.S. companies expect to reduce domestic workforce by 1.6 percent in 2010, while the number of outsourced jobs will increase. Two-thirds of companies say their employment will not return to pre-recession levels until 2011 or later.
— Among companies that recently instituted furloughs or reduced workforce, overtime, wages, 401(k) matches, or company contributions to health and other benefits, most say these cuts will not be restored in 2010. Nearly half of CFOs feel these and other cuts have reduced their company’s long-term growth prospects.
— Business conditions will improve somewhat in 2010, with earnings expected to rise 7.4 percent. Small increases are planned in capital spending, research and development, and marketing, an improvement from negative projections last quarter. Companies have begun to stockpile cash.
— CFOs’ top economy-wide concerns include weak consumer demand, federal government policies, price pressure and credit markets. Top concerns about their own businesses include profit margin maintenance, difficulty planning due to economic uncertainty, employee morale and liquidity management.
With all due respect to Fed chair Bernanke, I put much more weight in this independent survey of 1,431 CFOs than I do the heavily spun Fed release.
Our economic landscape remains very challenging.