America’s corporate leaders are planning to cut back on hiring and anticipate slowing sales over the next six months, according to a survey of CEOs. This comes as a cooling 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 September 18, provides insight into a weakening labor market and declining consumer spending expectations. The composite index, which measures CEO expectations for capital spending, hiring, and sales over the next six months, fell by five points to 79 in the latest survey, marking the first time it has dipped below its historical average of 83 this year. This decrease is mainly due to reduced hiring expectations and a sharp decline in anticipated sales, despite a slight uptick in capital investment plans.
Business Roundtable CEO Joshua Bolten stated that this is the second consecutive quarter in which CEOs have reported they are moderating their hiring plans. Capital-investment plans showed a slight improvement, with the subindex tracking capital expenditures rising by three points to 73. This suggests ongoing near-term business investment in things such as equipment and technology, which drive growth and productivity.
However, sales expectations took a significant hit, with the sales subindex falling by 13 points to 110 in the latest survey. This indicates that CEOs are increasingly concerned about moderating demand for goods and services as the economy cools. More cautious hiring plans were also reported by CEOs over the next six months, with the hiring subindex falling by five points to 55. Despite the slowdown, less than 30 percent of 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 stating 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, a slightly faster pace of growth than the 2.0 percent that Federal Reserve policymakers expect.
Federal Reserve Chair Jerome Powell acknowledged the cooling labor market conditions during his press conference on September 18, citing deteriorating labor market conditions as a justification for the Fed’s large 50 basis point rate cut. He also noted that the jobs-to-workers gap has narrowed and that overall, a broad set of indicators suggests that conditions in the labor market are less tight than before the pandemic in 2019. Powell stated 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 September 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. Hiring plans have also fallen to the lowest year-to-date total since Challenger, Gray & Christmas began tracking hiring plans in 2005.
