CEOs Scale Back Hiring Plans Amid Weaker Sales Projections, Cooling Economy

CEOs are scaling back hiring plans and anticipating slower sales as the US economy shows signs of cooling.
CEOs Scale Back Hiring Plans Amid Weaker Sales Projections, Cooling Economy
A 'Now Hiring' sign is displayed at a grocery store in Deerfield, Ill., on July 25, 2024. Nam Y. Huh/AP Photo
Tom Ozimek
Updated:
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America’s corporate leaders plan to pull back on hiring over the next six months and expect a slowdown in sales, according to a survey of CEOs, which comes as cooling in the jobs market has prompted the Federal Reserve to deliver a significant 50 basis-point rate cut.

The Business Roundtable’s CEO Economic Outlook Survey, released on Sept. 18, paints a picture of a softening labor market and expectations for a decline in consumer spending.

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, in the latest survey. This marks the first time that the index has dipped below its historical average of 83 this year.

The drop in the index is largely driven by reduced hiring expectations and a sharp decrease in anticipated sales, despite a slight uptick in capital investment plans.

“This is the second consecutive quarter in which CEOs have reported they are moderating their hiring plans,” Business Roundtable CEO Joshua Bolten said in a statement.

Capital-investment plans showed a slight improvement, with the subindex tracking capital expenditures rising by three points, to 73. Bolten said this signals ongoing near-term business investment in things such as equipment and technology, which drive growth and productivity.

Sales expectations took a significant hit, however, 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.

CEOs also reported more cautious hiring plans over the next six months, with the hiring subindex falling by five points, to 55. Despite the slowdown, less than 30 percent of the surveyed executives indicated they plan to cut headcount, a figure that is not far below the historical average. In addition, 37 percent of CEOs said they expect no change in their workforce, while 34 percent expect to increase hiring.

The decline in sales expectations could be influencing companies’ more conservative hiring strategies, with Bolten saying that the survey results seem broadly “consistent with the Fed’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. That’s a  slightly faster pace of growth than the 2.0 percent that Federal Reserve policymakers expect, according to the central bank’s latest economic projections, released on Sept. 18, as the Fed delivered an unusually large 50 basis-point rate cut, citing deteriorating labor market conditions.

“In the labor market, conditions have continued to cool. Payroll job gains averaged 116,000 per month over the past three months, a notable stepdown from the pace seen earlier in the year,” Federal Reserve Chair Jerome Powell said at a Sept. 18 press conference that followed the announcement of a rate cut—the first in four years.

“Nominal wage growth has eased over the past year, and the jobs-to-workers gap has narrowed,” Powell continued. “Overall, a broad set of indicators suggests that conditions in the labor market are now less tight than just before the pandemic in 2019.”

Powell said that as inflation has fallen closer to the Fed’s target of 2 percent and the labor market has cooled, the downside risks to employment have risen.

Fed officials now expect the unemployment rate to rise to 4.4 percent by the end of the year, up from 4.2 percent currently, and sharply higher than the 4.0 percent they projected in June.

Signaling that an era of monetary easing has begun, the central bank chief said that the “recalibration” of the Fed’s policy would help boost the economy and shore up the labor market.

Investors and economists have become increasingly focused on cracks in the labor market and signs of slowing growth.

Job openings slumped to their lowest level in more than three years in July, according to the government’s Job Openings and Labor Turnover Survey, released on Sept. 4.

Layoffs for the month of August hit their highest level for the month in 15 years—excluding the pandemic recession of 2020—according to a recent Challenger, Gray & Christmas report.

“The labor market overall is softening,” Andrew Challenger, the firm’s senior vice president, said in a statement.

Hiring plans have also fallen to the lowest year-to-date total since Challenger, Gray & Christmas began tracking hiring plans in 2005.

Tom Ozimek
Tom Ozimek
Reporter
Tom Ozimek is a senior reporter for The Epoch Times. He has a broad background in journalism, deposit insurance, marketing and communications, and adult education.
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