CEOs are spending more this year but not on new workers. Why not?
Encouraged by the breakthroughs in Washington, top U.S. CEOs report they are increasingly looking to boost capital spending. Their sentiments are not so promising, however, when it comes to hiring.
According to a new Business Roundtable survey of CEOs, while 72% of these leaders see an increase in sales in the next six months, only 37% expect to boost U.S. employment.
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The Daily Ticker spoke with Derek Thompson, a senior editor at The Atlantic, to find out why.
"Half the earnings in the S&P 500 come from overseas," says Thompson. "These are globalized companies ... so hiring where the sales are means not hiring in the U.S. Sales growth is in these emerging countries in Asia, in Latin America, even in places like Turkey."
At the same time, nearly half of the CEOs surveyed said they expect to boost U.S. capital spending in the next six months, compared with only 39% three months ago.
The chairman of the roundtable, AT&T CEO Randall Stephenson, told reporters and editors at The Wall Street Journal that he credits the two-year Congressional budget agreement reached at the end of last year for halting the cycle of budget battles.
Stephenson also said tax reform would help businesses increase investment and allow the eocnomy to grow -- if Congress cuts corporate rates and narrowed loopholes. It seems like "tax reform" has replaced "political uncertainty" as the policy solution from corporate America. So what gives? Check out the video for Thompson's explanation.
Stepping back, we do see signs that seem to indicate the unemployment situation is broadly improving across the country. On Monday the Labor Department said unemployment fell in 43 states in January, as more Americans began looking for work. The unemployment rate rose in just one state, Iowa, where it’s already very low at 4.3%.
Related: Jobs better-than-expected but "the labor market is still weak": NYT's Greenhouse
Thompson says hiring is getting better in a "thermostatic" recovery, but the surprising fall in the unemployment rate in the last 15 to 18 months reflects more people leaving the labor force, which counter-intuitively makes the jobless rate lower. And that's, in his view, what "we need to work on."
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