DURHAM – More than half of corporate financial executives expect a recession to hit the US economy in 2020, according to a new Duke University survey. However many companies continue to plan for the hiring of additional workers, are worried about finding and retaining talent, and want immigration reform so they can gain access to more talent.
So why the mixed messages?
“The recession is for the most part, next year not this year, and more about the overall economy, the world economy, hard-to-predict policymakers, etc.,” Duke economics professor Dr. John Graham tells WRAL TechWire.
“The recession is more of a threat that would slow things down in general but not necessarily significantly disrupt a company’s own plans for the next 12 months.”
Optimism about the performance of their own companies reflects the executives’ view that a “good plan” is in place for the coming months, Graham adds.
“Own-firm optimism is about how their own firm will navigate their own products, customers,” he explains.
“When companies feel like they have a good plan in place, and good prospects with their customers for the next 12 months, they can have high own-firm optimism.”
The survey, taken through June 6, focuses on coming months. Add up CFOs who expect a recession to hit before 2019 (8 percent) to those expecting a slowdown at some point in 2020, the percentage tops 60 percent. The forecast is in line with two recent Duke CFO surveys, but other watchers are not buying into recession rhetoric.
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NCSU Economist Dr. Michael Walden told TechWire in two recent interviews that he expects slower growth but not a recession, for example, if trade disputes continue.
Overall the US economy remains strong with first quarter Gross Domestic Product reflecting continuing growth; unemployment remains at record lows across much of the country (4 percent in North Carolina; less in the Triangle); and employers hiring a record number of workers in April, according to the federal government. Meanwhile, millions of jobs remain unfilled.
A survey from talent management firm Manpower released Tuesday found that hiring plans by companies are at the highest level seen in more than a decade with Charlotte and Raleigh among the metros where demand is hottest.
Hiring needed now
Companies are “trying to hire to fill a need this year; the recession would be next year,” Graham says.
“Also, the talent shortage is mostly about finding workers with the ideal skills – companies want to hire these skilled employees even with a pending recession.”
As these chief financial officers gaze into their crystal ball, they see a wide range of issues affecting the economy such as the lingering trade war and tariff disputes between China and the U.S.
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“The trade wars, and threats of trade wars, add significantly to uncertainty. If companies hold off on hiring or spending due to this uncertainty, this can slow the economy (somewhat of a self-fulfilling prophesy),” Graham says.
“Having said that, 90 percent of US GDP comes from the domestic economy, and 10% from exports. So, the concerns about a recession are not just about exports and trade wars.”
Overall optimism as measured by the survey dipped to 65.7 on a scale of o to 100. That’s a drop from 70 last September.
Global pessimism rises
Graham, who directs the Duke CFO Global Business Outlook survey, also stressed that rising concerns among CFOs around the world make the recession expectations more serious.
“The numbers may fluctuate slightly, but this is the third consecutive quarter that U.S. CFOs have predicted a 2020 recession,” Graham explains in the report. “It’s notable this quarter how strongly recession is being predicted in other parts of the world.”
Exclusive Q&A: Inside Duke CFO survey, from hiring to recession to immigration
The percentages of CFOs expecting a recession in 2020 by region:
- Europe, 63 percent
- Africa, 85 percent
- Asia, 57 percent
- Latin America, 52 percent
Campbell points out that “For the first time in a decade, no region of the world appears to be on solid enough economic footing to be the engine that pulls the global economy upward. Trade wars and broad economic uncertainty are hurting the economic outlook.”
Workforce needs
The survey also finds the companies continue to struggle to find and retain talent. That’s the top concern overall at 45 percent of respondents followed by government policies, economic uncertainty, data security and the rising costs of wages of benefits. Add worries about compensation and workforce related matters top 70 percent.
Campbell Harvey, a finance professor at Duke’s Fuqua School of Business and a founding director of the survey that dates back more than 23 years, described the shortage of qualified workers as “acute.”
“In the late stages of a business cycle, it is not unusual for CFOs to be confronted with tight labor markets and face difficulty hiring and retaining top talent,” he says in the survey. “However, this time is different. Given the reshaping of the American economy toward tech, there is an acute shortage of qualified labor. CFOs are strongly advocating immigration reform to fill the gap.”
CFOs by large margins want to speed up green cards for foreign graduate students in STEM fields (science, technology, engineering, and math).
Nearly eight in 10 of the respondents also want the US to adopt a merit-based immigration system.
Most also want to increase current government caps on work visas for “seasonal and lower-skill immigrant” workers.
“If the shortage of technologically-oriented talent is not addressed, this will stifle innovation, slow growth even further and winnow away at America’s traditional position of being the world leader in tech,” Harvey said.
Yet opinions are divided about such things as a border wall and open borders.
“The consensus is ‘we need more skilled workers, we also need more seasonal workers,” Graham tells TechWire.
“It’s not unanimous, but there is strong support (~80%) for immigration reform. Note that we did not ask CFOs about immigration in general but about immigration in the context of their worker needs.”
Graham says some CFOs “expressed frustration that qualified workers have to win a visa lottery to be hired long-term, when these workers are needed to fill a talent gap.”
However, he adds one point is clear: “The business community is sending a strong message to lawmakers about the importance of immigration reform.”
