Lower hiring expectations and a steep drop in optimism about the U.S. economy summed up the uncertain mood of CPA financial executives who took part in the AICPA’s Business and Industry Economic Outlook Survey for the second quarter of 2012.
Optimism about the U.S. economy dropped significantly after rising for two straight quarters.
The employment forecast is consistent with other recent signs of hiring slowdowns and represents a significant shift from the previous quarter, when CPA decision-makers from each of the 10 industries in the survey expected to increase their number of employees.
Jim Morrison, chairman of the AICPA’s Business & Industry Executive Committee, said the views on the U.S. economy in the survey reflect a “correction” in previous optimism that also has been seen in the stock market.
“I think it’s more of a wait and see rather than continue to be optimistic that things are going to get better,” said Morrison, the CFO of Pawtucket, R.I.-based materials science company Teknor Apex.
Hiring plans varied by industry. The survey, which included qualified responses from 1,250 CPA executives in business and industry, showed six industries forecasting an increase in their number of employees in the next 12 months. Technology, with predictions of a 1.3% staffing increase, was the most optimistic for hiring. Also expecting staffing increases, all of less than 1%, were retail trade, scientific and technical professional services, manufacturing, health care other (which includes pharmaceuticals and medical device suppliers), and finance and insurance.
Four industries—health care providers, wholesale trade, construction, and real estate/property—expect staffing decreases. Health care providers were the most pessimistic, predicting a 1.3% reduction in employees. All 10 industries reported less optimistic staffing forecasts than in the first quarter of the year.
Twenty-one percent of organizations need additional staff but are waiting to hire until the current economic uncertainty is resolved, an increase of one percentage point over the previous quarter. Twelve per cent plan to hire in the second quarter, down from 14% in the previous quarter.
Half of respondents reported difficulty filling open positions because of problems finding candidates with the appropriate qualifications. In another recent survey, CFOs reported increased difficulty in finding qualified accounting and finance talent.
Optimism for the overall U.S. economy dropped to 34% from 43% in the first quarter after posting increases of at least 10 percentage points in each of the previous two quarters. The CPA Outlook Index, a broad-based indicator reflecting responses on nine economic components, fell slightly after posting a first-quarter mark that had equaled its highest level since the third quarter of 2007, before the recent recession.
The Economic Outlook Survey is a comprehensive analysis of the US economy. The CGMA global economic forecast, which indicates worldwide economic trends based on responses of financial executives from across the globe, is scheduled to be released in July.
In the CGMA global report for the first quarter of 2012 42% of executives said their companies planned to take on more workers. Optimism about the global economy was higher than in the previous quarter, but below the levels that would be consistent with a broad-based economic recovery.
Respondents in the current Economic Outlook Survey remained somewhat confident about the prospects for their own businesses. Fifty-four percent were optimistic about their own organizations, a drop of just one percentage point from the previous quarter. The share of respondents expecting their own organizations to expand, 61%, remained the same. Expectations for revenue growth and profits fell slightly from the previous quarter but remained positive.
Morrison said that although the survey portrays uncertainty, it’s not nearly as grim as when the United States was in the grips of the recent recession.
“We’re certainly not in a fear of a huge recession or downturn,” Morrison said. “I think people are feeling good about their ability to withstand whatever the economic conditions throw at them, but they’re just not seeing the growth that’s going to help the unemployment picture and things like that enough. We’d like to see more, but we’re not running as scared.”
The AICPA’s survey was conducted May 16–31 and closed one day before the Bureau of Labor Statistics’ jobs report was released Friday and showed employment increasing by just 69,000 jobs during the month.
Technology remains the most optimistic industry with regard to its own prospects, according to the AICPA survey; health care providers are the most pessimistic. CPAs in the Midwest continue to be the most optimistic about their own businesses’ prospects, a distinction the region has held or shared since the fourth quarter of 2010.
Morrison said a promising development in the survey was the easing of concerns about energy and raw material costs as oil prices have decreased. Twenty percent of respondents reported that energy costs are the inflationary factor representing the most significant risk to their businesses, down from 27% in the previous quarter. Thirty-two percent said raw material costs are their businesses’ most significant inflationary risk, down slightly from 34% in the first quarter.
—Ken Tysiac (firstname.lastname@example.org) is a JofA senior editor.