- Tom Silva
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Keen for ’14
The nation’s CEOs are bullish about their prospects for the new year, according to annual PricewaterhouseCoopers survey of more than 1,300 chief executives, which was released on Wednesday. A full 39 percent were “very confident” that their company’s revenues would grow this year (up 3 percent from a year ago). More than 60% of the U.S. CEOs in the survey said they expect to hire more people this year–the highest in the past five years of the report. Sure they’re feeling good — businesses in the US are sitting on $1.4 trillion in cash; worldwide its $4.5 trillion, 73% more than the pre-recession level in 2006 (of course, you could argue that the reason it’s so high is that businesses hoard cash when they are uncertain about the market).
Add to this, the fact that the indicators have been good: the IMF has upped its world economy growth prediction to 3.7 percent in 2014 and says the U.S. will grow 2.8 percent. Goldman Sachs and Credit Suisse First Boston (CSFB) are both expecting this to be the best year since 2011. The World Bank is slightly more tepid but still optimistic , predicting growth of 3.2%, less because of the US and more because Japan and Europe are slowly getting their acts together.
Going back to the CEOs, 44 percent said they believe the global economy will improve in the next 12 months. Last year, 18 percent said so. So where do they see growth? A full 86 percent say it’s in “advancing technologies” that are going to transform their businesses in the next first years. They cite how tech intersects with other industries, such as healthcare and retail, to create new hybrid industries, according to the survey. One of the biggest drivers will be replacing outdated equipment (the average piece of equipment is 17 years old in the US).
That’s the good news. But let’s remember that it still doesn’t feel like a recovery for a lot of people. Despite the unemployment rate falling to its lowest level since October of 2008 at 6.7 percent, the labor participation rate is still a concern for many. 347,000 people dropped out of the labor force (that is, are no longer looking for work) according to the December report. However, even that number may have a bright side. a A recent study by Shigeru Fujita, a senior economist at the Federal Reserve Bank of Philadelphia says that “discouraged workers” only made up about a quarter of those leaving the labor force between 2007 and 2011, while “the decline in the participation rate since the first quarter of 2012 is entirely accounted for by increases in nonparticipation due to retirement.” If this is in fact the case, the current headline 6.7% unemployment rate may indeed reflect the true health of the labor market
Despite the dueling numbers, it is clear that partisans on both sides are correct: we have a lot of work still to do and we have a lot to be positive about.