Corporals of Industry

Let's hope it was a timing issue. The Business Roundtable released its latest quarterly economic outlook survey yesterday http://industryweek.com/articles/ceos_see_higher_sales_over_next_6_months_23419.aspx and BRT Chairman Ivan Seidenberg called the results "very positive." He pointed to the group forecast that sales would increase for 80% of these companies and that 59% would increase capital spending.

Those are welcome numbers but what is disturbing is that with higher sales and corporations sitting on a huge cash pile ($1.9 trillion), only 45% of these CEOs said they expect to increase their U.S. employment. Keep in mind that the U.S. unemployment rate rose slightly in November to 9.8%.

Gary Burtless of the Brookings Institution commented http://bit.ly/gZpgSz after the most recent jobs report: "For the eleventh successive month private employers added to their payrolls, but the job gains have been too small to put a dent in unemployment. On average this year, private employers have added 107,000 jobs a month. This pace is approximately fast enough to hold the unemployment rate constant, but it is too slow to reduce unemployment noticeably."

Now, it could be that a more optimistic report would have come if the Business Roundtable survey had been taken after President Obama and Congressional Republicans agreed to the compromise on tax rates and unemployment benefits, and after announcement of the U.S.-Korea free trade agreement.

Asked about the hiring situation, Seidenberg (Verizon's CEO) said CEOs were reacting to short-term signs of a pickup in demand. He pointed out that capital cycles occur over a longer 2-4 year period. A more robust recovery won't come until issues such as taxes and regulation are addressed, he said.

"I think we will see stimulus created over the next 12 months but I think if we don't head into 2012 and 2013 with more fundamental reforms, we will end up dragging our feet a little bit about how we can accelerate the growth of the economy," said Seidenberg.

Much of American industry was built by captains of industry who were willing to take bold risks. Given the current caution we see from one of our leading business organizations at a time of continuing national crisis, you wonder if we're not hearing from the corporals.