CFOs are feeling more confident about the U.S. economy and are planning to do more hiring, according to a new survey.
The survey, by Financial Executives International and Baruch College’s Zicklin School of Business, polled more than 220 CFOs in the second quarter of the year and found that 61 percent of them said they plan to hire within the next six months, and they expect a 3.5 percent increase in employee compensation on average over the next 12 months. Seventy-two percent of the CFOs who responded to the survey said they did not have to reduce their workforce over the past 12 months.
In addition, 49 percent of the CFOs polled believe the U.S. economy is already in the midst of a recovery, while 73 percent of the CFOs polled said they believe their businesses will be unaffected by a slowdown in China’s and India’s economy.
“The results of this quarter’s survey show that overall economic confidence among financial leaders in the U.S. has improved,” said Linda Allen, professor of economics and finance at Baruch College’s Zicklin School of Business. “Particularly encouraging is the attitude towards hiring: 61 percent of CFOs plan to hire within the next six months, and employee compensation is expected to increase by 3.5 percent.”
The respondents’ optimistic view on hiring and employment at their companies is reflected in their plans to hire mid-career professionals, entry-level college graduates and experienced and skilled technical workers. CFOs also expect the U.S. employment rate to improve, declining slightly to 7.3 one year from now.
“Previous surveys have shown reduction or minimal growth in the number of U.S. CFOs with plans to hire additional staff. However, the results of this quarter’s survey could indicate this trend is turning around,” said FEI president and CEO Marie Hollein in a statement. “It is hopeful to know that employment opportunities are expected to increase for professionals across a variety of levels, and that health care costs have not deterred many businesses from taking on full-time staff members.”
The health care reform law already appears to be having an impact on companies. Within the past six months, companies experienced on average a 4 percent increase in related costs in the last 6 months as a result of the Patient Protection and Affordable Care Act, according to the CFOs.
Fifty-eight percent of the CFOs polled said they expect health care regulations to increase the employee co-pay within their companies, while 43 percent anticipate a reduction in the quality of health care packages available and/or a reduction in benefits for employees.
The majority of U.S. CFOs who responded to the survey said they believe that the Federal Reserve’s quantitative easing policy will taper off by the end of 2014, while a quarter believe it would taper off by the end of this year. CFOs are generally split on the impact of QE on their companies. While 52 percent do not anticipate an impact on their company from an end to quantitative easing by the Fed, 48 percent expect an end to QE to affect their businesses, financing, and the equity or debt markets.
The survey also found that 65 percent of the respondents said their businesses were not affected by budget sequestration in Washington. Of the 18 percent that were impacted, revenue was the area most affected (82 percent). Contracts, customers and delays in orders were also commonly reported as being affected.
The quarterly optimism index for U.S. CFOs toward their own businesses increased three points to 70.7 from 67.1 in the previous quarter. Confidence in the U.S. economy among respondents improved, rising to 61.2 from 58.5 in Q1, with nearly half of all respondents (49 percent) indicating they believe the U.S. economy to already be in the midst of a recovery.
In the next 12 months, CFOs anticipate an 11 percent increase in net earnings and an eight percent increase in revenue. CFOs plan to increase their technology spending by 7 percent. More than half of the CFOs surveyed said that they are currently directing investments towards dashboard and performance metrics (53 percent), and CFOs are also investing in social media marketing and looking at R&D, cyber security and risk management. However, CFOs project a 10 percent increase in costs related to health care.
CFOs also weighed in with their concerns about various international economies. U.S. CFOs confidence in the global economy showed improvement, with an increase to 53.9, up three points from the previous quarter (50.8). Nearly three-quarters (73 percent) of the U.S. CFOs surveyed said they believe their businesses will be unaffected by a slowdown in China’s and India’s economy, and more than half of the respondents (55 percent) estimate that the current government stimulus program in Japan will be unsuccessful.
Businesses appear to be more vulnerable to the European economy, with 78 percent of the respondents rating their concern about the fate of the Eurozone at a “three or higher” on a scale of one to five (with one being “not concerned”). Furthermore, 44 percent of respondents do not expect to see a recovery of the European economy until 2015 or beyond.
