BOSTON (Reuters) - CEOs will hold their wallets a little bit tighter heading into the summer after the long-awaited recovery in U.S. employment stumbled in May.
The United States had been a relative bright spot this year in a troubled world economy coping with Europe's debt crisis and a cooling Chinese economy. But a weaker-than-expected May jobs report on Friday gave corporate America fresh worries.
AT&T Inc was one company that was not surprised by the disappointing jobs numbers as it has seen a lack of hiring at both big and small corporate clients. Fewer employees at these companies means fewer phone lines, which hurts AT&T's growth prospects.
"We are not seeing any hiring in the upper end of business in the U.S.," said Randall Stephenson, chief executive of the biggest U.S. phone company by revenue, told an investor conference in New York on Friday. "People aren't hiring a lot in the U.S," he said.
At smaller companies, Stephenson said, the situation was worse. "As you go down-market, it's getting tighter and tighter, and you're seeing the wallet for investment being less open."
The U.S. economy slowed its pace of job creation in May, adding just 69,000 jobs, the lowest monthly rate in a year. That, coupled with downward revisions in the number of new jobs added in March and April, helped push the unemployment rate up to 8.2 percent from 8.1 percent.
The data raised fresh worry about the stability of the nation's long, uneven recovery from the 2007-2009 recession and spooked investors, who sent the widely watched Standard & Poor's 500 stock index down more than 2 percent.
Other data on Friday showed European factories slowed further in May, while China's manufacturing sector barely grew.
In a sign of weakening consumer spending, automakers General Motors Co, Toyota Motor Corp and Chrysler Group LLC also reported weaker-than-expected U.S. sales in May.
"Over the last 30 days or so, the economic indicators came in just a little softer than in the first quarter," Ford Motor Co Senior Economist Jenny Lin said on a conference call.
VICIOUS CYCLE
Worries about the recovery have locked the U.S. economy in a vicious cycle -- companies are waiting to see strong growth before they take on significant new numbers of employees, but that growth is being held back by high unemployment.
"Two big areas are causing companies to pull back on their recruitment," said Scot Melland, CEO of Dice Holdings Inc, which runs websites companies use to recruit technology and finance workers. "One is concern about the global economy and concerns about Europe. The second is what's going to happen in the U.S.," he told Reuters. "It's nervousness about the election and regulation and taxes. It's uncertainty about what the business environment is going to be like."
U.S. President Barack Obama and his Republican rival, former Massachusetts Gov. Mitt Romney, have made the economy a centerpiece of the campaign.
The uncertain environment has CEOs keeping a tight rein on corporate spending.
Inge Thulin, who took over as CEO of diversified U.S. manufacturer 3M Co in February, said that was one reason he was maintaining the company's matrix management structure. Its operations around world are overseen both by their global divisions, which make products like Post-it notes and bandages, and regional executives.
"It is a volatile situation economically," Thulin told the Sanford C. Bernstein Strategic Decisions conference in New York. "In times like this, where you need to really make sure that you have 24/7 control of management relative to cost, that needs to be done locally, that needs to be done hands-on locally every day."
READY FOR TROUBLE
Some companies, including General Electric Co and Honeywell International Inc, readily admit to slowing demand in Europe, though they also contend that U.S. demand has been better than expected this year.
"The U.S.... has really been terrific and across the board and greater than we would have we expected. Europe is weaker," said David Anderson, chief financial officer at Honeywell, which makes products ranging from thermostats to cockpit electronics. "We're seeing the challenges now in terms of the commercial impact of (Europe's) financial and political stresses showing up in our numbers."
Honeywell has planned how it would cut costs in the wake of a sharp downturn in Europe but has not rushed to do so, Anderson said.
"We're being smart about it and we've got contingencies but it's not affecting how we're actually executing," he told the conference, adding that even in Europe, when the company finds an investment that it thinks will pay off, "we're continuing to fund that."
The memory of the financial crisis is still fresh for many top U.S. executives, who cut staff and other costs aggressively in the face of the worst downturn of their lifetimes. That, some assert, leaves them ready to handle another downturn should one arise.
GE Capital, for instance, this month said it was further cutting back the amount of commercial paper it issues, to about $25 billion -- less than a quarter of the short-term debt it had outstanding in early 2008, before that market briefly locked up and threatened the largest U.S. conglomerate's finances.
It is taking that step even though investors have a strong appetite for commercial paper right now, said Michael Neal, GE Capital's CEO.
"I don't think there is any issue with it right now," Neal told the Bernstein conference on Thursday, noting that "99.9 percent of the days there is no issue with that. It's that you have to build that strategy around that one bad day that is out there. So I would just tell you that we have learned our lesson."
(This story is filed to correct spelling to "Stephenson," paragraph 5)
(Additional reporting by Nick Zieminski, Sinead Carew and Ernest Scheyder in New York, Ben Berkowitz in Boston, Deepa Seetharaman in Detroit and Andrea Shalal-Esa in Washington; Editing by Patricia Kranz and Dan Grebler)
marg helgenberger censorship wikipedia sopa and pipa bills censoring the internet blackout blackout
No comments:
Post a Comment