WASHINGTON — Nearly one-third of the country’s top executives expect to cut payrolls in the coming months, reflecting fallout from the housing bust as well as soaring energy prices.
At the same time, a survey by the Business Roundtable, released Wednesday, showed that most executives expect sales and capital investment to remain at current levels or even improve over the next six months.
That’s consistent with expectations from the Federal Reserve and other economists, who say they think the fragile economy will strengthen later this year and into next year — even as the nation’s unemployment rate, a lagging indicator of business health, rises. As in the past, many employers won’t want to increase hiring until they are sure the economy is really back on a firm footing.
Businesses are “being very cautious, very cost-controlled oriented,” said the group’s chairman Harold McGraw III, president and chief executive officer of The McGraw-Hill Companies.
Over the past year, the economy has been bruised by the blows from the housing and credit crises. Soaring prices for energy, food and other commodities also are adding to the strains. Gas prices have topped $4 a gallon. Oil prices closed at $136.68 a barrel Wednesday.
“Clearly we got a more gloomy scenario,” McGraw said.
The survey found that 31 percent of chief executives said they expected to reduce employment at their companies in the coming months. That’s up from 22 percent who said they expected to cut payrolls in a previous survey released in April. Seventy percent of executives in the new survey said they probably would hold payrolls at current levels or boost them. That’s down from 78 percent in the old survey.
Every month so far this year, cautious employers have eliminated jobs. The unemployment rate rose to 5.5 percent in May from 5 percent in April, the biggest one-month rise in two decades.
The results of the overall survey “reflect the broad crosscurrents at work in the U.S. economy,” McGraw said. “Our CEOs clearly have tempered their overall expectations against a backdrop of continued housing declines and mounting energy prices. That said, CEOs remain cautiously optimistic about their sales and spending projections.”
In the survey, 91 percent said they expected their sales to hold steady or increase over the next six months, the same percentage as the old survey. Nine percent said they expected sales to go down — also the same as the previous reading.
Businesses will try “as best as they possibly can” to boost customers’ prices to cover some of the higher costs for fuel and other materials, McGraw predicted.
On capital investment, 85 percent said they would hold such investment steady or increase, the same as the old survey. And, 15 percent said they expected capital investment to decrease, the same as the old reading.
For this year, the executives predicted the economy’s growth would be 1.3 percent, down from a previous estimate of a 1.5 percent growth. If the new estimate proves correct, the would be the weakest growth since 2001, when the economy was last in a recession.
The Business Roundtable is an association of CEOS of major corporations, representing a combined work force of more than 10 million employees and $4.5 trillion in annual revenues. The quarterly survey, conducted May 22 through June 9, was based on the responses of 110 of the group’s 160 member companies.
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