CEOs Still Have Bleak View of the Economy

Conference Board survey says their confidence level is lousy. A portent for the future?


CEOs call the tune for a lot of US economic activity: hiring, capital spending, new products. And in a recession: layoffs, belt-tightening, hunkering down. The Conference Board’s latest poll of America’s corporate chieftains shows that their confidence in the future is still pretty grim.

At a time when the stock market is soaring—the S&P 500 closed down 0.2% Thursday, and is within a hair of topping the February record—the C-suite is taking the opposite view. The research group’s CEO confidence survey, done with the help of the Business Council, nudged up to 45, from 44 three months ago. A reading below 50 means a negative outlook.

That translates to 38% of CEOs expecting to reduce their workforce over the next 12 months, and more than a third that will grant no wage hikes. What’s more, 37% plan to cut capital expenditures. Half of them will boost wages, but by less than 3%.

“Without substantial containment of COVID-19, widespread uncertainty will continue being the dominant cloud hanging over America’s CEO community,” said Bart van Ark, the Conference Board’s chief economist. “With more than one-third of CEOs planning to make workforce and sizeable capital spending reductions over the next year, the effects on the economy could extend beyond the next 12 months.”

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If you look around at the charred economic landscape, that makes sense. In the second quarter, the annualized gross domestic product (GDP) loss was 32.9%, and 9.5% down from the March-ending period. In July, the nonfarm unemployment rate fell to 10.2% from 11.1%, as hiring rose. But the virulence of the recent virus outbreaks may worsen that still-towering figure.

The one bright spot, relatively speaking, is that the past week’s jobless compensation claims fell below 1 million for the first time since March. What’s more, the savings rate has shot up to 25.7% in the second quarter, from a mere 9.5% in the prior period. This suggests that, should the virus ever be brought under control, a lot of American consumers will have the cash on hand to spend, a boon for the economy.

For now, though, the folks who run the nation’s corporations are not seeing many silver linings.

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