CEOs Show Pessimism About Economy
An index of chief executives' confidence in the US economy plunged to a record low last month, reflecting deeper concerns about the credit crisis and prospects for hiring.
Most CEOs expect a drop in employment levels over the next four to five months, according to a monthly survey by Chief Executive magazine released Thursday.
Its monthly confidence index stood at 84.1 in March, down 25.3 points from the prior month and down by half since July, shortly before the subprime mortgage crisis hit.
The magazine polled 321 CEOs between March 11 and March 26.
A majority said they consider current conditions to be "bad."
"They're basically saying, this is as bad as it gets right now," said Edward Kopko, publisher of Chief Executive magazine, which has been doing the survey since October 2002.
The drop in the index reflects concerns about the dimensions of the problems in the financial industry, and the possibility that an economic slowdown will hurt demand for their products and services.
Access to capital, $100 oil, and the prospect for higher corporate taxes were also cited as areas of concern.
Most CEOs said a recently passed stimulus package would make no difference to their business, and many said a greater government role in the economy was not welcome.
The survey results also suggest companies are becoming less willing to make investments or hire people, Kopko said.
For the first time, a majority of respondents -- 56.7 percent -- said they expected a drop in employment in the upcoming quarter. Only 13 percent gave that answer a year ago.
"We're going to be in for a rough employment market the next four or five months," Kopko said.
The forecast comes amid evidence of strain in the U.S. labor market. Initial applications for jobless benefits jumped by much more than expected last week and a four-week moving average of new claims reached its highest level since October 2005, the Labor Department said.
On Friday, the March employment report is expected to show the third consecutive monthly decline in nonfarm payrolls.
The CEO survey has proved to be a strong predictor of the job market, Kopko said. After the 2001 recession, it pointed to an upturn a few months before hiring picked up, and it suggested steady employment levels ahead of the 2004 election, which also turned out to be right.
The survey, whose components distinguish between current and future conditions, indicates the current downturn may last longer than in the past.
"They're saying: 'It's bad in the current (environment), but I'm even less optimistic about the future,"' Kopko said, adding there was a disconnect between CEO attitudes and the recent performance of the stock market.
"The market jumped (this week) like maybe everything is behind us," he said. "CEO attitudes are not quite reflective of that yet."