NEW YORK–Although the most recent jobs report exceeded nearly everyone’s expectations and unemployment is at record lows, a new survey of large companies finds a majority expect to reduce headcount over the next 12 months.
The Q4 CNBC Global CFO Council survey found 60% of chief financial officers say they will be cutting staff over the next year.
“CFOs are not pessimistic on the economy. The Q4 CNBC survey finds a minority — only 15% of U.S. CFOs — think a recession will occur next year,” CNBC reported. “Their fears about U.S. trade policy as the biggest risk to their business have declined (15% cited trade as the biggest external risk this quarter). But there are reasons the biggest employers may be poised to pull back on staffing, according to economic and labor market experts. And there are a few key recent market numbers that support the negative jobs forecast.”
‘Stumbled Below Trend’
Among the negative points, according to CNBC, is an analysis by Glassdoor that found the largest employers (5,000 employees+) have cut back on job openings in the year-over-year period through November by 6%.
“Job-openings growth in the last year or so has been slower for large employers,” Daniel Zhao, senior economist and data scientist at Glassdoor, told CNBC.
Zhao said of the 6% decline in November: “It stumbled well below the trend.”
The Glassdoor economist told the publication job openings are a more forward-looking indicator than the monthly nonfarm payroll report, and there are times during economic cycles when there is “a little disconnect between job growth and job openings ... an inflection point between these two that shows employment growth going down.”
‘Not a Major Turn’
Zhao and other experts, however, told CNBC they do not expect a major turn in the labor market trend.
Gad Levanon, chief economist, North America, for The Conference Board, told CNBC the November report was probably an outlier — if it did make most economists a little more optimistic — but his prediction remains moderate to slowing employment growth next year, but still a positive growth rate.
“I would be surprised if we had fewer workers next year than now. That would be a major development,” Levanon said. “Not only has headcount never gone down in this expansion, I don’t think it has ever gone down in any expansion. In almost every case it has to be a recession for the annual count of jobs to go down. The general trend is up; there is just more work to be done in almost every company.”
A Different Factor
A different factor may be at work, according to Levanon.
“If you look at corporate profits numbers and operating profits — revenue minus expenses — there is reason enough right there. Revenue has slowed down compared to last year, and labor costs are accelerating. That’s enough to squeeze profits, and that will continue for years,” he told CNBC. “It could be the answer from CFOs that many expect cuts in headcount reflect the need to cut labor costs in order to boost profits,” he added.