The 2024 hiring plans of finance executives, plus their top challenges

In the fourth-quarter results of the Business and Industry Economic Outlook Survey, CPA decision-makers remain pessimistic about both the global and U.S. economy, but less so about their own organizations.

They also are showing a hesitance to hire, facing an array of challenges, as explained in this episode of the JofA podcast. Guest Ken Witt, CPA, CGMA, AICPA & CIMA associate director — Management, Accounting Research and Development, analyzes the results of the quarterly survey.

What you’ll learn from this episode:

• How sentiment has changed regarding recession likelihood in the past few quarters.
• Projections for the next 12 months for revenue and profit.
• A recap of how the top challenges have shuffled lately, including regulatory concerns falling far down the list.
• The trends in hiring and why some workers may be more likely to stay put than look for another job.
• The specific part of decision-maker sentiment that Witt is waiting for in 2024.

Play the episode below or read the edited transcript:

To comment on this episode or to suggest an idea for another episode, contact Neil Amato at Neil.Amato@aicpa-cima.com.

Transcript

Neil Amato: Welcome back to the Journal of Accountancy podcast. This is your host, Neil Amato. Our guest is a repeat one on the JofA podcast. His name is Ken Witt. He’s a CPA who holds the CGMA designation. He is AICPA & CIMA associate director — Management, Accounting Research and Development. He’s talking about the quarterly Economic Outlook Survey, which basically gauges the sentiment of U.S. finance decision-makers in business and industry. Ken, welcome back to the podcast. We look forward to digging into some of the survey results with you today.

Ken Witt: Sure, thanks, Neil. Always good to be with you. If you recall, last quarter, we had a bit of a rebound from the doom and gloom scenario we saw in the second quarter. This quarter, I would say, we’re seeing a little bit, maybe a settling in of that sentiment tone, not much worse, but not much better. Some of the results for summary:  Optimism about both the global economy and the U.S. economy slipped a bit this quarter. Global economy fell back another three points from 17% to only 14%, still a little bit higher than it’s been in the past. But not very optimistic about global economy.

Optimism about our U.S. economy fell from 29% to 24%, and pessimism about the U.S. economy increased from 34% to 43%. Fortunately, while optimism about our executives’ own organizations fell two points, from 45% to 43%, there’s much less pessimism this quarter, down from 34% in the third quarter to only 19% saying they’re pessimistic about their own organization this quarter.

Amato: Some of the KPIs that we regularly look at – revenue projections, profit projections – one thing I noticed is that about a year ago, the profit projections were actually negative. Again, that was a year ago, not a quarter ago, but where do you see those sitting in terms of what the finance decision-makers are looking forward [to] the next 12 months?

Witt: That was a part of the gloom and doom scenario that we’ve seen in recent quarters. But as I said, things are settling out a bit. Revenue projections dropped only a tenth this quarter from 1.9% last quarter to 1.8% this quarter, and profit projections continued to recover a bit from the nine-tenths of a point decline on average we’re seeing in the second quarter to now only half a point projected increase looking forward from Q4. As I said, not great news, but half a point profit projection for the coming year is better than the negative projection we were seeing recently.

Amato: Again, this survey covers responses from the second through fourth weeks of November. The results of the survey came out on Thursday, Dec 7. We’ll include a link to our JofA coverage in the show notes for this episode. Ken, I want to get some to just the overall thoughts of the decision-makers on inflation and also a potential recession.

Witt: We’ve been tracking both of those for some time now, along with pricing plans on the inflation front. We’ve been asking survey-within-the-survey questions on both the recession and what people plan to do with their pricing. And on the inflation front, after dropping from 78% of our respondents to 67% of our respondents being concerned about inflation last quarter, that number ticked back up another two points. We’ve got 69% of our respondents this quarter still concerned about inflation.

On a positive note, the number  of companies with plans to increase their pricing dropped a bit this quarter from 37% to 28%. Those planning to hold the line on pricing increased from 51% to 63%, so a little bit of good news there. In terms of recession expectations, only a quarter of our respondents say that they do not expect a recession, but 16% say that we’re already in a recession, and 49% are saying they expect a recession either by the end of 2023, which we’re getting very close to now, or in 2024, and this is up from 43% expecting a recession last quarter. I think in terms of challenges, you’re talking about inflation and domestic economic conditions returned to the No. 1 and No. 2 ranking of the top 10 concerns. Inflation get her does continue to be a big concern amongst our respondents.

Amato: In addition to revenue and profit projections, some of the other KPIs that are measured include expansion plans for businesses and also hiring. What is the update on those fronts?

Witt: Similar to this sort of easing in optimism about our respondents’ own organizations, the percentage of companies with expansion plans eased from 50% to 48% and those with plans to contract held relatively constant at 25%. Hiring plans showed a bit of easing as well, while we still have 36% of organizations or companies of all sizes needing employees, we now have 16% of those who are hesitant to hire, and the balance of 20% planning to hire ASAP. This number is down from 25% having plans to hire last quarter. We’re seeing a little bit of easing in the hiring and the pressure on employees.

Amato: Let’s go to challenges. You’ve noted some of those a little bit. There have been some interesting shifts this quarter. Tell me more about the challenges and how they’ve changed.

Witt: As I said, inflation and domestic economic conditions returned to the No. 1 and No. 2 ranking of the top 10 concerns. Similarly, we’re seeing that easing and employee and benefit costs, there continues to be pressing at No. 3 concern. tThat reflects the payroll increases, the pressures that companies have seen over the past couple of years and increasing their payroll, and their wages and salaries. But the availability of skilled personnel, which had topped the list last quarter, fell to the No. 4 slot this quarter.

And staff turnover, which was last quarter at No. 5, fell three slots to the No. 8 spot. Some of the hiring issues continue in full force, especially the cost of employees, but we’re seeing a little easing in the pressure of availability in personnel, and turnover is settling out a little bit. On the financing side, it continues to be a problem. We asked about financing and cost of capital that jumped three slots to the No. 6 position, and liquidity reappeared in to the top ten at the No. 10 spot. It’s been in and out of the top 10.

Financing is problematic, continues to be. But as I mentioned, we’re seeing some interesting changes in the top 10. We’ve seen a few of our categories fall out of the top 10. Materials, supplies, and equipment costs, which are recent inflationary times, has been front and center and pretty high on the list, but it dropped out at the top 10 this quarter. As did regulatory requirements and changes, which have all been there on a consistent basis, and domestic political leadership. Both the regulatory requirements and domestic political leadership. We’re seeing comments in people’s concerns where we ask for the rationale for their optimism or pessimism, but they dropped out of the top 10 list.

Amato: More to say on that front. Sorry, I interrupted.

Witt: Yeah, I think what’s interesting is domestic competition appeared in the No. 5 position. It was last seen in the top 10 in the first quarter of 2023. Stagnant or declining markets also jumped three slots to the No. 7 slot. Developing new products, services or markets returned to the top 10 and the No. 9 slot, which is its first appearance since the first quarter of 2021.

There’s something going on in the economy, there’s a shifting of gears. Companies are obviously seeing a different view of the competitive markets and the stagnant markets and the need for developing new products and services. That will remain to be seen what evolves from this point, but I thought it was an interesting shift in some of the highly ranked challenges.

Amato: Going back briefly to that No. 3 concern employee and benefit costs. I believe, you said “reflecting payroll pressures.” Is it possibly a higher concern because people are maybe now that they have what they have, they’re secure and they’re not leaving, and so maybe that’s a concern for companies?

Witt: Well, yeah, maybe less of a concern. I think with what we’ve been seeing in the job markets, some of those increases that they had to pay have now becoming embedded in their cost structures. They have to pay what they have to pay to have skilled personnel. But that concern top the list last quarter, it’s fallen down to the No. 4 slot this quarter, and staff turnover, which was No. 5, last quarter fell three slots to No. 8 spots.

I think you’re right, people are staying put, we’ve had concerns or we’ve had actually announcements of layoffs and a number of major companies. What we’re seeing right now is just a bit of more settling out of the labor market as well as people have made their changes that were available to be made. Now, there’s concern on the part of the employees that do I really want to shift gears again, or should I stay put and we’re seeing a lot of that staying put.

Amato: Ken, it’s the fourth quarter of 2023. As a closing thought, what do you look forward to us learning about the survey respondents and their sentiment in 2024?

Witt: The big concern is whether we have a soft landing or not, that we still have a significant number of our respondents still concerned about a recession in 2024, and how difficult that recession might be, or whether it actually materializes or not, remains to be seen. But I think we’re likely looking at based on the comments I made about the challenges list, we’re seeing a new evolution in our economy in 2024, so we’ll see what the future brings.

Amato: Ken Witt, thank you very much.

Witt: Thank you, Neil.