CEO Survey Sees Economic Growth Improving, Hiring Lagging

CEO Survey Sees Economic Growth Improving, Hiring Lagging

Business leaders are more optimistic about the economy but their confidence is not translating into plans for new hiring, according to a survey of chief executives released Wednesday by the Business Roundtable.

The business group found that 72 percent of the 144 CEOs said they expected sales to pick grow this year, up from 58 percent in the final quarter of 2012. The CEOs project an 2.1 percent economic growth rate this year, roughly in line with other predictions.

That growth is not enough to trigger new hiring, however, since companies can try to wring more productivity out of existing employees

Although 38 percent of CEOs said they planned to boost capital expenditures, an eight-percentage-point increase over the previous quarter, but only 29 percent said they planned to increase hiring, a level unchanged over the previous quarter.

The survey of business confidence comes amid signs of improvements in the economic in the early part of 2013.

The Census Bureau reported Wednesday that retail sales grew at a 1.1 percent annual rate in February. Excluding gasoline prices and auto sales, spending was up 0.6 percent.

The increase beat consensus expectations of 0.2 percent growth in retail sales and the 0.1 percent rise in January. It also was 4.6 percent better than retail sales in February 2012.

Morgan Stanley chief economist Vincent R. Reinhart said in a research report released Wednesday that the economy is on the verge of an “inflection point” this year marking the end of the persistent drag from the 2008-2009 financial crisis that has held back expansion. Reinhart said political gridlock remains a major cloud hanging over economic growth this year.

Boeing CEO Jim McNerney, who chairs the Business Roundtable, said the results of the group’s quarterly CEO survey “reflect an economy that is improving but still mired in a slow recovery.”

Concerns over Congress’ inability to address tax and fiscal issues were leading companies to try to rely on capital expenditures to meet growing demand rather than invest in new employees, he said.

“We keep lurching from one crisis to another here in D.C., which does put a little bit of damper on investment and particularly long-term investment,” he said.

Although the survey was conducted before an $85 billion package of across-the-board budget cuts under sequester took effect, the impact of the spending cuts was clearly weighing on the minds of CEOs, McNerney said.

Still, despite the CEOs’ reluctance to hire, employment has been picking up. Last month, the private sector added 246,000 jobs, bringing the unemployment rate down to 7.7 percent, according to the Bureau of Labor Statistics.