The National Association for Business Economics (NABE) released its most recent forecast for company optimism. The results were another example of how much U.S. gross domestic product has suddenly slowed in the eyes of corporate management, and the extent to which a jobs rebound has become unlikely for the rest of 2012.
In its summary of its new findings, NABE reported:
“The survey results suggest worsening economic conditions through increased flatness in sales and profit margins, less upward pressure on employment, weakening optimism concerning real GDP growth, and rising concerns about the impact of the European crisis, potential US government spending cuts in January, and the expiration of Bush-era tax cuts in December, although there are fewer inflationary pressures,” said Dr. Nayantara Hensel, Professor of Industry and Business at National Defense University. “The rising sales and profit margins experienced earlier in the year may have been short-lived. Over half of the panelists in the current survey reported unchanged sales and unchanged profit margins. Only 39% of panelists in the July survey reported rising sales and 29% reported rising profit margins, which is much lower than the 60% of panelists reporting rising sales in the April survey and the 40% reporting rising profit margins. Optimism on real GDP growth has weakened.
Worse still, only 23% of respondents believe employment will improve over the next six months, which compares to 39% in the NABE April survey.
So, where, if anywhere, will there be improvements in employment and the economy? The options have nearly run out.
Government jobs mostly have eroded so far this year. That is likely to continue. Austerity already has hit employment at the state and municipal level. A new recession would cause local government to cut services if tax receipts fall as they did in the recent recession. Congress and the Administration are bound to choose federal job cuts rather than to approve stimulus packages. If so, both the federal jobs and private sector employment will suffer.
Consumer spending has been the key to U.S. GDP growth, which has been the case for decades. Consumers look at the economy through a lens similar to the way the NABE does. People see no improvement in wages, job security or taxes. Many believe that tax cuts will not be extended, which will eat into both their earning and job prospects.
It seemed for a time that corporate earnings and job additions due to those profits would lift GDP growth to 3% in the final quarter of this year. The figure is likely to be less than 1%, based on most sentiment.
Douglas A. McIntyre