CEOs in the US are adjusting their hiring plans and bracing for a slowdown in sales as the economy shows signs of cooling. The Business Roundtable’s CEO Economic Outlook Survey, released on Sept. 18, revealed that corporate leaders are expecting a decline in consumer spending and a softening labor market.
The survey’s composite index, which measures CEO expectations for capital spending, hiring, and sales over the next six months, fell five points to 79, signaling a decrease in hiring expectations and a sharp drop in anticipated sales. However, there was a slight improvement in capital investment plans, with the subindex tracking capital expenditures rising by three points to 73. This indicates ongoing near-term business investment in equipment and technology, which drive growth and productivity.
Sales expectations took a significant hit, with the sales subindex falling 13 points to 110 in the latest survey. This suggests that CEOs are increasingly concerned about moderating demand for goods and services as the economy cools. Hiring plans also became more cautious, with the hiring subindex falling by five points to 55. However, less than 30 percent of the surveyed executives indicated they plan to cut headcount, and 37 percent expect no change in their workforce, while 34 percent anticipate an increase in hiring.
The decline in sales expectations may be influencing companies’ more conservative hiring strategies, aligning with the Federal Reserve’s perspective on a softening economy. The CEOs surveyed by the Business Roundtable predicted that the U.S. gross domestic product (GDP) would grow 2.3 percent for all of 2024, slightly faster than the 2.0 percent expected by Federal Reserve policymakers.
Federal Reserve Chair Jerome Powell acknowledged the cooling labor market conditions and cited a notable stepdown in payroll job gains and eased nominal wage growth. Powell stated that the broad set of indicators suggests that conditions in the labor market are now less tight than before the pandemic in 2019. The Fed now expects the unemployment rate to rise to 4.4 percent by the end of the year, higher than the 4.2 percent currently.
Investors and economists have been closely monitoring cracks in the labor market and signs of slowing growth. Job openings hit their lowest level in over three years in July, and layoffs for the month of August reached their highest level in 15 years, excluding the pandemic recession of 2020. This indicates that the labor market overall is softening.
Overall, the survey results and economic indicators point to a cooling US economy, prompting CEOs to adjust their hiring plans and anticipate slower sales. The Federal Reserve’s rate cut and recalibration of policy aim to boost the economy and shore up the labor market in response to the deteriorating conditions. As the year progresses, it will be crucial to monitor how these economic trends continue to evolve and impact businesses and the labor market.
