Forget
The Happy Talk: Longer, Deeper Recession Lies Ahead, Execs
Warn
24 December 2009By Dave Lindorff
If you google “recession easing,” you will find
articles all the way back to April quoting Federal
Reserve Chairman Ben Bernanke as saying that the
recession is easing, and that the economy is
“improving modestly.” Newspapers and TV news programs
too, on their own, have run rose-tinged stories about
how things are bad but getting better.
Spins get put on every hint of good news, as when last
month “only” 11,000 jobs were lost (a story that was
quickly followed by an “unexpected” jump in new
unemployment claims by 474,000 in early December).
What didn’t get widely reported was a report by the
Association of Financial Professionals, a trade
association that includes CFOs, treasurers,
comptrollers, and risk managers of mid-sized and large
corporations, which asked over 1000 of these
executives the question: “When do you expect your
company to begin hiring again?”
The answer tells you all you need to know about the
depth of the current economic crisis, and blows all
the media and government happy talk out of the water.
This Outlook Survey by the APF, which was funded by
Wells Fargo Bank, shows that 26 percent of executives
expect to see their company payrolls continue to
shrink in 2010, while 46% more expect employoment to
stay at current low levels. Put another way,only 25%
of companies surveyed expect to return to
pre-recession hiring levels in 2011, while 32% don’t
expect a hiring rebound until 2012. And fully 30% “do
not expect their organizations ever to return their
payrolls to pre-recessionary levels.”
And here’s another troubling bit of news. The same
survey respondents say that their companies’ access to
credit--the willingness of banks to lend--has barely
budged. In fact only one in six reported that the had
found credit a little easier to obtain in the last six
months, while one in five actually reported that it
had become harder to obtain credit. So much for the
Obama administration’s and the Federal Reserve’s
vaunted efforts to throw so much money--literally
trillions of dollars--at the banks that they would
start lending.
More than half of the executives responding to the
survey said that if credit doesn’t become more
accessible by mid-2010, their firms will have to take
steps to conserve cash--steps which could include
cutting capital spending (68%), freezing or cutting
hiring (62%), cutting inventory (25%), delaying
payments to suppliers (23%), tightening credit offered
to customers (23%) and drawing down existing credit
lines (22%). Note that all of these steps are things
that would put a further drag on the economy and could
push it into a second downward spiral.
Remember this survey the next time you read that
President Obama or Fed Chief Bernanke or Treasury
Secretary Timothy Geithner says the economy is coming
back, or that the unemployment situation, while bad,
is about to start turning around.
The executives who are making business plans for their
companies, and who are looking at the cash flowing out
and the empty order books, aren’t so sanguine about
the future. And if those hiring plans are correct,
this is a recession from which the economy simply is
not going to recover, at least for many working people
whose jobs are never coming back.
The bad news from finance executives lends added
weight to a warning by Nobel economist Joseph Stiglitz
who says there is a "significant chance" that the US
economy will slip back into a decline in the coming
year, going from a U-shaped recession to a "W-shaped"
one--a dreaded double-dip recession, with slumping
economic activity leading to worsening layoffs, more
bankruptcies, and more pressure on the government to
finally take dramatic action on jobs.
Currently a professor at Columbia University, Stiglitz,
a former chief economist at the World Bank, says the
government should act now to help state and local
governments, which are running out of money, and to
create new jobs. He warned the Obama administration,
"If you don't prepare now, and the economy turns out
to be as weak as I think it's likely to be, then
you'll be in a very difficult position."
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