Finance execs’ optimism grows, but many firms plan more job cuts

Updated Sep. 16, 2009 at 11:45 a.m.

Finance execs’ optimism grows, but many firms plan more job cuts

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DURHAM, N.C. – The employment picture is likely to worsen at many companies not just in the U.S. but in Europe even as the economy stabilizes, according to financial executives questioned in the latest Duke University-CFO Magazine Global Business Outlook Survey.

The outlook for capital spending is grim as well as companies struggle with decreased consumer demand and tight credit markets.

The report echoes a warning issued Wednesday that jobless rate in the 30 rich countries that belong to the Organization for Economic Cooperation and Development will approach 10 percent in the second half of next year. That would top the current post-World Ware Two high of 8.3 percent set in June.

However, despite the grim news on spending and hiring, CFOs are growing increasingly optimistic about the U.S. and global economy. Continuing a rebound that started last quarter, U.S. CFOs give the U.S. economy of 56 on a scale of 1-100. That’s the second monthly increase from 52 the previous quarter.

Asian CFOs give the economy a 68 rating, up from 63.

Chinese CFOs put the economy at 71, up from 70.

European CFOs scored the economy at 52, up from 47.

“The economy is showing signs of life in the U.S., with CFOs expecting earnings to grow over the next year and corporate optimism improving again this quarter,” said Kate O’Sullivan, senior writer at CFO Magazine.

“While this suggests that the overall economy is stabilizing, the employment picture continues to deteriorate,” O’Sullivan added. “Western economies continue to operate conservatively in terms of head count. This is troubling because job security – and along with it, the entire consumer sector – will remain under stress for the foreseeable future. We expect it will take two to three years, maybe longer, before employment returns to year-end 2007 levels. This will dampen economic growth for several years.”

In the U.S., with employment already headed toward 10 percent, 43 percent of the CFOs said their firms plan to cut jobs over the next year. Only 30 percent plan to increase hiring.

The Duke/CFO survey is even worse than the most recent Manpower hiring survey announced last week. According to Manpower, 12 percent of 28,000 companies interviewed plan to add workers but 14 percent are looking to cut staff. Of the remainder, 69 percent expect to maintain current work forces while five percent are still undecided.

On Tuesday, UNC Charlotte economist John Connaughton forecast that North Carolina’s job picture would continue to worsen the rest of this year, if only slightly. He forecast unemployment at 11.2 percent in December, up from 11.1 percent in July.

Duke international business professor Campbell Harvey said the survey indicates higher unemployment nationally.

“The good news is that employment losses are expected to moderate, with CFOs saying they expect to decrease their work forces by 3 percent on average over the next year, compared to an alarming 6 percent in last quarter’s survey,” said Harvey, founding director of the survey. “But the bad news is two-fold: first, the outlook points to increased unemployment; second, there is an expected surge in outsourcing, suggesting many U.S. jobs could be lost forever.”

The job picture is even worse in Europe where 56 percent of firms plan more job cuts and a mere 18 percent are looking to hire.

Companies are hiring in Asia, however, with 60 percent of firms surveyed planning to add jobs.

Offshoring is expected to increase by 3 percent, however.

And only 13 percent of companies plan to return their work forces to 2007 levels in the next year.

Capital spending, meanwhile, is expected to be cut by 3 percent,

Credit problems also continue to hinder 56 percent of U.S. firms.

The survey, which ended Sept. 11, included 1,537 CFOs from private and public companies.

Tags: Employment, Layoffs

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