Business leaders cut sales and hiring forecasts

Published 12:12 am Wednesday, September 29, 2010

WASHINGTON — The leaders of America’s largest companies have scaled back their sales forecasts and plan to hire fewer workers over the next six months, according to a survey released Tuesday.

The Business Roundtable said its economic outlook index fell for the first time in five quarters, reflecting increased doubts about the U.S. recovery. The group cut its forecast for annual growth to 1.9 percent from its earlier target of 2.7 percent.

The influential group pinned some of the blame on Washington, D.C., saying the threat of higher taxes and new regulations has created an uncertain business climate in which companies are hesitant to expand.

“Uncertainty is affecting the growth of the economy,” said Ivan Seidenberg, chairman of the Business Roundtable and CEO of Verizon Communications Inc. The group represents companies with nearly $6 trillion in annual sales and 12 million workers.

Although the Business Roundtable mostly supported White House policies in the first year of the Obama administration, the group has turned more critical. Earlier this year, Seidenberg warned about a “growing disconnect” between business and government that he said was preventing the economy from growing faster and creating more jobs.

According to the latest Roundtable survey, just 31 percent of America’s biggest companies plan to hire additional workers over the next six months, down from 39 percent in the second quarter. And the survey found that 23 percent plan to eliminate jobs, up from 17 percent one quarter ago.

Although the U.S. recession officially ended in June 2009, millions of people remain out of work, and the 9.6 percent unemployment rate stands near a 27-year high.

Businesses won’t add workers until sales pick up and the economy gains momentum. Yet most are wary of increasing their payrolls, given weak U.S. and global growth and fierce international competition.

Although 66 percent of CEOs expect sales to increase in the next six months, that’s down from 79 percent in the last survey.

The one potential bright spot: 49 percent plan to boost capital spending, compared to 43 percent in the second quarter. Capital spending is one of the main drivers of the U.S. economy.

Some of that spending, however, is likely to involve the purchase of new technologies that make a company more productive but also reduce the need for additional workers.

Seidenberg said businesses need more clarity from Washington. Even though CEOs object to some of the tax and regulatory proposals in Congress, Seidenberg said businesses want Washington to make up its mind quickly so they can plan appropriately.

“Give us certainty one way or the other,” he said.