For one, CEOs have long memories. Having lived through the bloodbath of the 2008 recession, CEOs don't want to get caught flat-footed again. In retooling their operations and re-evaluating their business management needs post-2008, many CEOs conclude that they can run their businesses "lean and mean" with fewer workers and with an increased use of technology.
Translation: that midlevel manager job, that internal-only supervisory job and that nonessential service job has been replaced with a website posting, a voice mail program or a customer-driven automated execution system. That job is not likely coming back, even in a more robust economy.
Moreover, many CEOs fear rehiring workers too quickly in what has proven to be an elongated, sluggish economic recovery. If businesses are now profitable, albeit at slightly lower levels of profit than in the "good old days of 2007," it's pennywise and pound foolish to avoid adding potentially excessive labor costs on a business that might not grow revenues quickly enough to justify increasing its cost of operations. What CEO would want to painfully fire employees yet again after the trauma of 2008 should business conditions fail to fully revive?
Unfortunately, this CEO hiring hesitancy has persisted since the onset of our U.S. economic recovery. Multiplied across the country, such hiring hesitancy fosters and extends the torpid pace of economic growth that the U.S. just can't seem to kick.
If few jobs are being created, there is not enough incremental income being generated to be spent on goods and services. Since consumption constitutes 70 percent of U.S. GDP, there is just not enough income stemming from new job creation to jump-start the economic recovery that we all so desperately want to watch unfold.
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To be sure, the Federal Reserve is keenly aware of this self-fulfilling economic malaise. How else can one explain the economic cheerleading exercises that Ben Bernanke and most of his peers have led since 2008?
So where do we go from here? That's a tough call. For three consecutive years, the Federal Reserve has made U.S. GDP forecasts that have fallen materially short of the actual economic growth that followed. It's no wonder, therefore, that investors remain skeptical about the accuracy of the Fed's latest forecast that the economic growth will revive and that the unemployment rate will fall to 6.5 percent by the end of 2014.
In the end, the burden of generating a sustainably high rate of real GDP growth largely falls on the shoulders of America's CEOs. This is why many investors monitor real-time surveys of U.S. business leaders such as the YPO Global Pulse. Gauging business leaders' mindset helps to anticipate business leaders' actions.
To be sure, fiscal, regulatory and monetary policies advocated and implemented by politicians and Federal Reserve governors set the table upon which businessmen must act. However, U.S. economic growth is nothing more than the collective result of the willingness of America's CEOs to grab the baton of loose monetary policy, invest in their businesses, increase their capital spending and hire the persons who can productively add value to their businesses.
If CEOs can find the confidence to invest in their businesses, we will witness a rekindling of economic strength that validates America as the leading engine of global economic commerce.
—By Alan Zafran, managing director, First Republic Investment Management