Execs’ optimism about US economy plummets to 11-year low, survey finds

RALEIGH – A day after JPMorgan Chase CEO Jamie Dimon forecast an economic “hurricane” coming, a new survey of business executives indicates that many share the same concern. Atop the list of business leaders concerns: inflation and labor costs.

According to the survey, senior leaders of U.S. companies are less optimistic about the next 12 months than at any point in the prior 11 years. And fewer than one in five executives expressed any optimism, according to the results of the Association of International Certified Professional Accountant Economic Outlook Survey.

Just 18% of executives expressed optimism about the American economy. And even fewer, 12%, expressed optimism about global markets.

And an overwhelming majority of respondents viewed the U.S. economy at risk of slipping into recession within the next year, as 25% see significant risk, 48% see moderate risk, and 24% see slight risk.

Only 2% of all respondents don’t anticipate a risk of recession coming in the next 12 months, according to a statement released by AICPA.

But a recession is not guaranteed, a Triangle economist told WRAL TechWire.

“Our economy is suffering from some external shocks that once they are resolved, that could alleviate the risk of a recession,” said Dr. Anne York, a professor of economics and program director at Meredith College.

The quarterly survey polled 549 CEOs, CFOs, controllers, and other certified public accountants (CPAs) working for U.S. firms who hold executive and senior management positions. This was the first survey sent for response following the beginning of the conflict between Russia and Ukraine, AICPA said in a statement.

Recession could hit in last quarter of this year, NCSU economist warns

What concerns executives most

Atop the list of reported concerns was the impact of inflation on the U.S. economy and on the executive’s companies. According to the survey, that includes the cost of labor and operation costs, which are anticipated to increase at a rate of 4.4%.

Yet don’t just blame inflation, another Triangle expert points out.

“I would disagree with … the extent to which inflation is being driven by wage increases,” said John Quinterno, a professor at Duke University. The ongoing COVID-19 pandemic and its impact, along with “price hikes by firms with extreme market power, are the main factors, said Quinterno.

“The types of executives surveyed here always will be cool toward labor and compensation gains,” said Quinterno. “While nominal wages have grown since the economic shutdowns of Spring 2020, the rate of wage growth has lagged the overall inflation rate, which suggests that wage growth is slowing inflation, not amplifying it.”

Much of the wage growth has come for lower-wage workers, noted Quinterno, who for decades have struggled with stagnant wages and in some cases, a decline in real wages or purchasing power. Firms like Bank of America, Verizon, and MetLife have all raised minimum wages in the prior two years.

So current wage increases can be a positive for the economy, including that wage growth may be slowing, not accelerating inflation, said Quinterno. “That is a much-needed corrective to past policies, assuming the pattern sticks,” he added.

Inflation dips slightly but we’re a ‘long way from relief,’ economist says

Other costs rising, too

Other rising costs are giving executives worries, as well, including energy costs and the cost of borrowing capital as interest rates are anticipated to rise.

And while last quarter, 58% of executives were optimistic about their own company’s performance, just 47% of respondents in the latest survey expressed that sentiment.

“The survey presents an accurate and realistic view of the economic outlook,” said Dr. Michael Walden, an economist and a William Neal Reynolds Distinguished Professor Emeritus at North Carolina State University in an interview with WRAL TechWire. “Elevated inflation, continuing supply-chain issues, a downward-trending stock market, and now the possibility of a recession as a result of the Federal Reserve’s efforts to reduce inflation, are the major issues that are concerns to business executives—and they should be.”

There are other concerns, as well. Four in 10 executives reported their organization has urgent hiring needs, and 16% said they have job openings and are understaffed, yet remain hesitant to hire due to economic conditions and uncertainty.

The cost of materials, supplies, and equipment was the second most concerning aspect of the current economic conditions, according to the survey.

“Hopefully COVID-19 will have less virulent variants so there’s no more concern about locking down or social distancing; China will be able to keep their economy open in the face of Covid; and the Ukraine-Russian war will find a peaceful resolution sooner than later,” said York. “Otherwise, the fears of these executives have a good chance of becoming a reality if these issues of COVID-19 and the war are not settled in the next couple of months.”