The Chilling Thing CEOs Of Corporate America Said About Jobs

Tyler Durden's picture

Submitted by Wolf Richter via WolfStreet.com,

Part of the “unfortunate new normal.”

Corporate America has spoken again. The Business Roundtable, a lobbying group composed of the CEOs of the largest members of Corporate America, released its third quarter 2016 CEO Economic Outlook Survey today. And what it said about employment was ugly.

These companies matter in the US economy. They have combined global revenues of $7 trillion per year and a combined stock market capitalization of $7.9 trillion (that was probably before today’s selloff). They employ 16 million people. They buy nearly $500 billion a year from small and medium-sized firms annually. When they turn negative on employment, it has a ripple effect.

The overall economy remains mired in the “unfortunate new normal” – that’s how Business Roundtable Chairman and Caterpillar CEO, Doug Oberhelman, summarized the survey results. This “unfortunate new normal” is the condition where the economy is “pretty much stuck in neutral rather than moving forward.”

The survey results “show a continuation of an economy that’s failing to live to its potential,” he added. Which has been the case for years.

The overall economic outlook index – a composite of CEOs’ six-month projections for sales, capital spending, and employment – dropped 3.9 points to 69.5, well below the historical average of 79.6. But anything above 50 in this diffusion index (whose upper limit is 150) means growth, however slow it may be. And so these CEOs pegged 2016 GDP growth at “just” 2.2%.

Lousy as this sort of economic growth is, it could still be a stretch, given how crummy the last two quarters had been: real GDP in Q2 was only up 1.2% year-over-year. So there better be a boom in the second half.

And two of the three sub-components are further deteriorating.

Expectations for sales over the next six months fell by 9.3 points, with 59% expecting an increase, 29% expecting no change, and 11% expecting a decrease. But they’re an optimist bunch. They always are when it comes to sales, no matter how tough the situation. This includes BRT Chairman Oberhelman, whose company, Caterpillar, has been dogged by revenue declines since 2012. But it’s always going to get better.

In the second quarter, the S&P 500 companies have booked year-over-year revenue declines for the sixth quarter in a row! The last quarter with a revenue increase had been Q4 2014. That was a long time ago!

But on the premise that it’s always going to get better, the diffusion index for sales, though down 9.3 points, came in at 98.3 – well into growth territory, though on a downward slope of optimistic projections. And sales optimism hasn’t been this low very often (chart by BRT):

us-business-roundtable-sales-2016-q3

Employment projections by these CEOs portray a much tougher, and perhaps more realistic view of the economy, than their sales projections. Expectations for employment declined by 3.4 points from last quarter, with only 27% of the CEOs expecting to increase their payroll, while 37% expect no change, and a chilling 36% expect to cut their payroll.

This puts the employment index at 40.8, down from 44.2 in Q2 and flat with Q1 – the worst levels since the Financial Crisis. The index has been in contraction mode (below 50) all year. Last time it contracted was in Q3 and Q4 2012 (44.2 and 49.3), during the peak of the euro debt crisis that had rattled the nerves of these multinationals. I added the red line to BRT’s chart to show just how ugly these employment plans have become:

us-business-roundtable-employment-2016-q3

The fact that 36% of these big-company CEOs are planning to cut their payroll over the next six months, while only 27% are expecting to increase their payroll, is a very unwelcome harbinger of an economic situation that, from their point of view, is getting tougher and tougher, and requires greater cost cuts and payroll reductions. And if – or when – they’re implemented, they’ll ripple through the economy. Not exactly the rosy scenario we would like to see.

They’d believed in six years of Wall Street hogwash. Now reality sets in. Read…  The Great Debt Unwind Beneath the Surface: US Commercial Bankruptcies Soar

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VinceFostersGhost's picture

 

 

Screw jobs.....I need the big bonus!

 

Of course half of it goes to the Clinton Foundation......which really sucks.

 

JRobby's picture

We are not hiring, we are firing.

Where's my bonus? Coming right up your Eminence! 

roxyNL's picture

Greed and competition of the middle class made america

Greed and competition of the (((elite))) will kill america

sessinpo's picture

LOL. I thought that was tim cook saying that.

wonderatitall's picture

who cares,let it all burn. im waitin on ma CHECK

buzzsaw99's picture

any article like this that doesn't lambast obscene executive compensation is worthless imo. oh well, the system is beyond saving anyway. let it burn.

Cognitive Dissonance's picture

You wouldn't begrudge a CEO a little 'earned' income, now would you?

/sarc

RaceToTheBottom's picture

CEO: "There are little people.  There always were little people.  There always will be little people."  

It is best to recognise their thinking.

BandGap's picture

Agreed, we are well past the point of arguing salient issues. The bread and butter is that this isn't, and never was, a recovery.

I am so tired sometimes. Anyone else getting burned out?

Huh Reeeally's picture

Maybe, but the focus was the next 6 months forecast, not ethics or hindsight.

We all read about Wells Fargo. You want to address exec comp and the huge fines paid for criminal activities? Ask the depositors of Wells, BofA, JPM, Citi, GS why they like paying high bank fees so execs get that sort of compensation and can still pay the fines. Just who's money do you think they're spending??? Why do people still have money in those criminal enterprises? Why don't they close their accounts? That's the most effective means of addressing exec comp. Plenty of small, regional banks are well run, why not use them? These days your bank can be anywhere, doesn't have to be 'down the block', could be 1000 miles away.

Cat's fate was sealed a long time ago, there is competition now, they can't keep up, no significant new products or tech in the pipeline, too busy buying back stocks, same for most big corporations. They're done, stick a fork in 'em.

Some pigs think they're more equal than others, but they're just muppets too. Sorry for the rant, it's not directed at you.

Nunya Bidness Gogl's picture

You hit the nail right on the head. We can't count on .gov, or the big banks to police themselves. We must vote with our feet/dollars, that's the only real recourse we have.

Or even better, deal with a credit union! That's what we have done. FeelsGoodMan.jpg, no more BS fees every time you turn around, every account holder is a share holder, if the CU make a profit, you get a piece of it. Completely different paradigm from a commercial bank, who's business model is "charge the customer as much as they can without having them close their account and go elsewhere."

After you have done this yourself, promote the idea via social media and by talking to your friends, etc... spread the good word... it's probably something that most people don't even think about.

GreatUncle's picture

+1 We must vote with our feet/dollars and why they want to remove cash.

JRobby's picture

Everyone read about Wells Fargo but no bank run has commenced yet?

It can't just be GMO's, pollution and food additives making people this stupid.

What could it be?

gunsnmoney's picture

You forgot lead in da water, ther fixed it.

Wormwoodcums's picture

While everyone else is fucking up the show (big banks) does it not leave a vaccuum (a.k.a. an opportunity) for someone to step in and do things right? If that is the case then there is more opportunity now then there has ever been.  

GreatUncle's picture

There is no fix if those that are the problem will not give up what they have stolen.

Comedy tour can't remember his name "get 'er done" rhymes with "let 'er burn".

THE DORK OF CORK's picture

Gdp expansion is not growth in the economy 

It is a growth of prices in the economy.

The global combines are simply worried that the wage slaves cannot afford their prices.

It's really is that simple.

The Gap between GDP and net national income is the waste in the economy.

It benefits only the few.

CJgipper's picture

Money velocity is all that matters.  And it's zero.  And has been since 2007.

ThanksChump's picture

+11ty

 

Give the man a hand for most-correct answer.

 

A lot of back/forth thrashing by Glass-Steagleless banks does not a market make. I'm in the let-it-burn camp. We're all set up to make s'mores.

Huh Reeeally's picture

Money velocity, LOL, we little people used to call that Cash Flow, and you're right, it's the only thing that matters.

Hard to buy something when you're tapped out, and the middle class is tapped out. When I was a kid 1 wage earner could buy a house and support a family, and live decent. Now, not so much, takes two incomes to barely scrape by, no real middle class wage increases, in constant $ terms, for 20-30 years. So, no wage increase and inflation has stolen 70%+ of the value of that currency over the same time perriod. Inflation is printing excess currency and expecting it to hold the same value, rather like corporate share dilution, we see inflation as higher prices but really there's just more money in the system chasing the same amount of goods/services.

Everything is going according to plan.

JRobby's picture

Jackpot!!!!

All the new $$$$ parked at the top of the pyramid.

If they could quantify all of the assets purchased and gains on those assets that were acquired with stolen public $$$, the world would never stop vomiting.

GreatUncle's picture

Stacking money at the top of the ponzi in an economy loaded with debt is that value somewhere had a debt attached to it. That fucking debt had to be serviced.

If you took the top 1%, grabbed half their worth and burned the fucker then you halved the amount needed to service it.

They would still be the top 1% but the economy now becomes 50% better balanced.

Helicopter money will never work neither, last a short time but then gets stacked at the top of the ponzi again.

wildbad's picture

let the punishment fit the crime

Thoresen's picture

Is this thread a critique of Steve Jobs and Apple's decision to have its EU HQ in Cork?

Pumpkin's picture

You hit the nail on the head there Dork.  They are out pricing the masses.  The elite can only consume so much.  It's going to take some (a lot actually) deflation to fix this problem.

ebworthen's picture

Of course they are cutting their payroll.

If there is one dispensable thing for American corporations it is the American worker!

Mustafa Kemal's picture

"If there is one dispensable thing for American corporations it is the American worker!"

If that is not sarcasm, then you havent been paying attention. They are eliminating the worker and replacing with machines.

Sandmann's picture

Yes but Obama is doing great things for them....ask the UAW

ThanksChump's picture

All the jobs that can be easily replaced by robotics are already gone. From here, it becomes log-e increasingly difficult to replace meat jobs, and therefore more expensive. I design robotics systems.

 

H1Bs and minwage are the primary enemies of the US worker right now, and by extension or enablement, the Democrats. Fuck them all with Hillary's dick.

 

The problem can be delayed if the minwage were done away with. Nobody wants to discuss that because it will stir up the monolithic thinkers in the herd. I could house/feed/clothe 7-10 people in return for a few hours' work each per week. It worked for thousands of years until some well-meaning morons broke it. That's 7-10 people who don't need a 9-5 OR welfare. What's that look like nationally? 40%? 50%?

Nunya Bidness Gogl's picture

H1Bs, I dunno, they don't really issue all that many last time I checked (admittedly, my info might be out of date). Although I would say illegal workers are a much greater problem than the relatively much fewer who go to the trouble to work here legally. Depending on type of work of course, I think you are referring more to tech people, I am referring more to landscapers, maids, construction workers, etc...

But min wage being a problem? I dunno man. If WalMart were allowed to pay people less, they would. It's just another expense to be reduced. But look around, don't you realize by now where completely unfettered capitalism ends up? With all of us competing with Chinese workers for the "good" jobs making $0.22 per hour. That's the end game and natural progression of capitalism, and the one that the free market fundamentalists always seem to gloss over.

ThanksChump's picture

"H1Bs, I dunno, they don't really issue all that many"

Dell just fired 2300 as they applied for 5000 H1B visas. That's how it's done. H1B was intended to "fill the technology worker gap". Instead, they're always used to replace domestic workers at a lower price.

 

"If WalMart were allowed to pay people less"

Sure, WalMart will pay as little as it can get away with, but people have a lot more options for living their lives. They don't HAVE to accept WalMart's low pay. As a bonus, millions of people who aren't worth $7.25 an hour on their best day aren't forced to be on welfare any longer.

 

Most people can't think through even a simple problem like minimum wage effects, and that is why we have this neverending cascade of unintended consequences.

 

That's why this has to crash: you and your ilk have broken everything, you have no idea how you broke it, and everything you will try can only make things worse.

monad's picture

Increasingly replacements are not on board with it. Besides massively disrupting their own lives they recognize that they are being used to undermine the economy and they see the long term consequences. I think the idea of increasing risk of being killed by an angry mob is another factor in their reluctance to continue pursuing the big short.

TeethVillage88s's picture

who are the players; statists, globalist, corporatists, politicians, bankers, lawyers, wall streeters... what did that guy say? free marketers...

yeah, hard to say we have free markets. but the terminology no longer seems to have meaning.

H1B workers
Refugees/immigrants legally coming here
Slave labor in China and other places
Black Market Labor
Black Market Economy (services & products)

Robots/computers/automation that replaces labor force
Offshoring to replace labor force
Outsourcing to reduce labor force costs
structured legal schemes to replace labor force

Human Trafficking/capturing people for slavery/piracy
debt Bondage/Indentured Servant
Using Prisoners or political prisoners for labor
Use the elderly for labor if they are poor
Impressment into a military or army
Communism
Dictatorship

NAFTA
CAFTA
TPP
TAP
TTIP

Start WWIII to destroy regional economy, capital assets, create population that will work for peanuts, water, and bread.

Bananamerican's picture

where is this "free market" of which you speak?

sharonsj's picture

The minimum wage in most places is $8 or so.  And you want to do away with it so people will work for $5 an hour?  If they can't buy anything now, how will earning less help the economy?  Unless you can back up your claim that a few hours' work each week will support a family, fuck off.  P.S.  It didn't work for thousands of years.  You needed an entire clan of hunter/gatherers going out and searching all day, every day, to survive.  Pioneers worked from sun up to sun set and popped out a dozen kids (free workers) to survive. 

ThanksChump's picture

If it's a good idea that causes no problems, then why not make the minimum $100 / hour? A billion/hr?

 

Jeez.

TeethVillage88s's picture

Deflation and inflation need to be discussed globally and nationally.

Real estate investors love inflation.
government loves inflation to decrease it's debt burden.
Central bank policy is to cause inflation.

But look how fucked up we are in health care, education, local and state government compensation, federal compensation, corporate compensation, rent seeking behavior, paper pushers that don't produce anything, lawyers, bankers, tax advisors, book keepers, financial advisors,...utilities, property and sales taxes... food.

We need deflation, but not sure if we would have to destroy both debts and our currency to do it.

the future value of our money stinks.

SomethingSomethingDarkSide's picture

"Markets" = "Federal Open Market Committee"

Say it until it is burned into your fucking memory banks forever.

THE DORK OF CORK's picture

In  Ireland the green corporatists boast that energy consumption per unit of GDP is the highest in the world and sure are we not great little dozzers. 

But the waste ( production not consumed by the human)  must manifest itself somehow. 

In Ireland the classic  physical economic indicator is jet kerosene consumption as people desperately try to escape prices.

RaceToTheBottom's picture

I haven't fueled my jet in days....

THE DORK OF CORK's picture

In  Ireland the green corporatists boast that energy consumption per unit of GDP is the highest in the world and sure are we not great little dozzers. 

But the waste ( production not consumed by the human)  must manifest itself somehow. 

In Ireland the classic  physical economic indicator is jet kerosene consumption as people desperately try to escape prices.

Mustafa Kemal's picture

Yes, Walmart just fired 7000 lower middle people and is headed towards "moar efficiency" with the ultimate goal that there will be just the owner and the slaves on the floor.

While Alice Walton's net worth is over $80B, and thats just her.  The rest of her family and friends own the rest of that iceberg. Yet, they need moar efficiency because they need moar profit. Moar free stuff.

Nekoti's picture

Who doesn't need 80 billion just to get by?

NoWayJose's picture

Alice isn't firing them - the top management just below are. And they want bigger bonuses!

Sandmann's picture

Wal-Mart isn't firing Workers it is firing Customers

Kagemusho's picture
Hillary, Wal-Mart And The Red Chinese Secret Police - How The Clinton's Helped China Conquer America http://allnewspipeline.com/Hillary_Wal_Mart_Red_Chinese_Secret_Police.ph...
RaceToTheBottom's picture

Walmart is just migrating their existing outsourcing and H1b strategy into management.  

What you thought technical people were the only possibility of outsourcing?

 

Fuck everything about Wall-mart.  They are lowend financialization plebes of WS.