CFOs: Stronger Hiring Outlook

June 7th, 2012
in econ_news

Econintersect:  The chief financial officers of 444 U.S. firms indicated an increase in hiring plans for the next twelve months.  The survey results come at a time when the BLS (Bureau of labor Statistics, U.S. dept. of Labor) monthly Employment Situation Report numbers have been showing a slowing of job growth (Non-farms Payrolls data) for the past two months (April and May).  The average of all respondents was an increase in employment of 2.5% over the next twelve months, up from 2.1% two months ago and an average of 1% projected during the second half of 2011.  Hiring is planned at 60% of the companies surveyed and 30% of all companies said their workforces were stretched to the limit – maxed out and working at full capacity.

The increase in hiring plans stands in marked contrast to a decrease in optimism reported in the same survey Click on graph for larger image.


Follow up:

The Duke CFO survey covers companies of all sizes and the sentiment results are more negative than small business optimism reported by the NFIB (National Federation of Small Businesses).  The NFIB Small Business Optimism Index is at 88% of its high for the past ten years (see GEI Analysis) while the Duke/CFO optimism is significantly lower at 76% of the ten-year high.

The level of optimism for the economy in Europe is lower than the U.S. while Asia is quite similar.  In Asia there is a closer agreement between own firm and general economy optimism than is the case for Europe and the U.S. Click on graph for larger image.

The survey results for the U.S. are shown in the following table.  Click on table for larger image.

The reason for the increase in hiring plans in the U.S. may be related to the decline in productivity reported today by the BLS.  See: Productivity 1Q2012 (Final):  Decline Downwardly Revised.   The latest numbers indicate that employers, on average, have passed the optimal point of squeezing more out of their existing employees and will need to hire to improve efficiency.  That is exactly what the Duke CFO Survey results indicating increased hiring plans may be reflecting.

When the 60% of firms in the Duke CFO Survey planning to hire in the next twelve months (and 30% saying the need is extreme) is compared to the 18% of small firms planning to hire in the NFIB survey results last month, a conclusion is that employment opportunities will likely be coming from medium and large firms more than from small businesses.  This is not the usual situation which sees small businesses as the engine for employment growth.

The data from Europe is shown in the following table.  While generally weaker than the U.S., it is quite strong compared to the dire predictions that have been made recently for a recessionary year in Europe.  Click on table for larger image.

Survey results from China are especially noteworthy because of internal contradictions:  Revenue growth is expected to be much lower than it has been, while employment, spending and cash retention are expected to be increased.  Click on table for larger image.

There are interesting regional contrasts.  Among these is the outlook for employment:

  • China and Europe both show projections of 4.8% increase – this for two regions that have considerably different economic outlooks for the next twelve months.
  • Asia without China (data table not shown here) projects 8.3% employment growth – nearly 75% greater than for China.
  • The U.S. has the lowest employment  increase expected at 2.6% - If this is projected onto the current number employed in the U.S. that would be more than 5 million new jobs.  What is not covered in the survey results is how many companies expect to cut jobs and how many jobs that might cause to be lost.

Below is the entire Duke University News press release:

June 6, 2012, DURHAM, N.C. -- In contrast to last week’s Bureau of Labor Statistics report, which reported an increase in the unemployment rate in May, chief financial officers expect hiring to remain strong in the U.S. over the next year.

This finding is included in the most recent Duke University/CFO Magazine Global Business Outlook survey. The quarterly survey, which concluded May 30, asked more than 800 CFOs from a broad range of global public and private companies about their expectations for the economy. (See end of release for survey methodology.)

The survey has been conducted for 65 consecutive quarters, and spans the U.S., Asia, Europe and Latin America, making it the world’s longest running and most comprehensive research on senior finance executives. Presented results are for U.S. firms unless otherwise noted.


-- U.S. finance chiefs plan to expand workforce by 2.5 percent, on average over the next year. Nearly 30 percent of U.S. firms say their employees are “maxed out” -- working at full capacity -- and 60 percent are looking to hire.

-- Despite the expected strong job growth, CFO optimism in the U.S. dropped from 59 last quarter to 56 this quarter. Asian optimism, which has traditionally been higher than that in the U.S., fell to 58 from last quarter’s 65, marking the first time in the survey’s history that U.S. and Asian optimism are nearly the same. European optimism fell to 52 from last quarter’s 54.

-- U.S. earnings are expected to increase 11 percent, tech spending 8 percent, and capital spending 5 percent.

-- Business corruption is not viewed as a problem in the U.S., is a modest problem in Asia and is a significant problem in Latin America, reducing quality and raising prices.

-- Firms are building in significant contingencies before making corporate investments. As a result, the Fed’s interest rate policies have little effect on their investment plans.

-- Most firms continue to stockpile cash because of great economic uncertainty.


The employment outlook continues to improve, with U.S. finance executives expecting to increase their number of domestic full-time employees by 2.5 percent. The Duke University/CFO Magazine Global Business Outlook survey is the first reading on employment after last week’s disappointing Non-Farms Payroll report from the Bureau of Labor Statistics.

“The Duke-CFO survey measures plans for the next 12 months, which is in contrast to the Bureau of Labor Statistics’ assessment of the employment situation, which measured a single month: May,” said Kate O’Sullivan, editorial director at CFO Magazine. “In contrast to the BLS number, CFOs indicate a level of hiring that would reduce the national unemployment rate to near 7 percent within a year, if all else remains constant.

“More than one out of four U.S. CFOs say their employees are maxed out, so the planned increase in payrolls is long overdue,” O’Sullivan said.


The U.S. CFO Optimism Index, in which CFOs rate their confidence in the economy on a scale of 0 to 100, decreased from 59 last quarter to 56 this quarter. Even with this drop, the level of U.S. optimism closed the gap on Asian optimism, which fell to 58 from last quarter’s 65. The optimism index in Europe dropped from 54 last quarter to 52; Latin American CFOs rated their optimism at 54.

“The drop in optimism is a bit worrisome for the U.S. because historically a drop in optimism foretells slower economic activity over the next year,” said John Graham, a professor of finance at Duke’s Fuqua School of Business and director of the survey. “On top of that, falling Asian, European and Latin American optimism confirms that the world economy is slowing. Combined with reduced plans for U.S. capital spending, overall domestic economic growth will likely continue to soften over the next year even as hiring ticks up slightly.”


The Federal Reserve’s fiscal moves appear to have little impact on corporate investment. “CFOs are telling us that they are building in large contingencies before going ahead with investments,” said Campbell Harvey, a Fuqua finance professor and founding director of the survey. “The size of this buffer exceeds 4 percent per year.

“As a result, current policies like Operation Twist (a $400 billion policy designed to lower longer-term interest rates) have little or no effect. Only 3 percent of CFOs tell us that a long-term interest rate increase of 1 percent would cause a delay or cancellation of an investment project.

“The economy will not get back to normal growth without a robust increase in corporate investment,” Harvey added. “We know U.S. corporations are sitting on huge cash reserves. CFOs are telling us that manipulations of interest rates by the Fed via quantitative easing are not going to have the desired impact.”


U.S. executives say business corruption (fraud or bribery, for example) does not have much impact on their activities, with fewer than one-in-10 indicating corruption is significant. In contrast, 35 percent of Asian and three-fourths of Latin American CFOs say corruption is a significant issue. Approximately half of Latin American survey respondents say corruption leads to higher prices, lower quality, slower growth, reduced competition and reduced tax revenues for the government.


Thirty-nine percent of U.S. companies say they dedicate resources specifically toward pursuing major innovations. Among these firms, on average 3 percent of total budget goes toward transformational innovation, and 6 percent towards moderate risk / moderate reward innovation.

As in the U.S., 39 percent of Asian companies devote a portion of their budget to pursuing major innovations. However, Asian firms plan to spend more (5 percent) of their total budget on transformational innovation.


U.S. firms plan to increase capital spending by nearly 5 percent over the next 12 months, down from more than 7 percent in the last two quarterly surveys. Spending on technology should grow by 8 percent and research/development and marketing/advertising outlays are expected to grow about 3 percent.

“Rather than spend, slightly more than half of companies say they will instead continue to hoard cash,” said Graham. “While building up and holding onto cash balances may be prudent for any one company, it limits potential growth in the overall economy.”

Businesses are holding on to cash because of concerns about credit markets potentially tightening, extreme economic uncertainty and a lack of attractive investment opportunities.


Hiring, research and development, and advertising spending will be relatively flat in Europe over the next year. Capital spending and earnings are each expected to fall by 1 to 2 percent.

European firms will continue to hold on to their cash, citing liquidity concerns, extreme economic uncertainty and a lack of attractive investment opportunities. Those that will spend cash are as likely to use it to pay down debt as to make business investments.

Corporate debt ratios have risen in Europe. The typical European firm would like to reduce its amount of debt by issuing equity and paying off bank debt.

Nearly half of European CFOs believe their workforce and physical assets are underutilized.


Asian CFOs who are growing more pessimistic outnumber those growing more optimistic by nearly a three-to-one margin. Asian optimism fell to levels last seen during the recent recession.

Asian firms are concerned about intense price pressure, weakening demand, global financial instability and uncertainty, liquidity, governmental policies and low employee productivity and morale.

Wages are expected to rise 7 percent in Asia over the next 12 months, while full-time domestic employment should increase by 3 percent.

Capital spending will grow by 7 percent, while earnings will rise only 1 percent.

Unlike their Western counterparts, the typical Asian company plans to unleash cash over the next 12 months. The cash will be used for capital spending, acquisitions, marketing, paying down debt and increasing employee pay.

For additional comment, contact CFO Magazine’s Kate O’Sullivan at (617) 345-9700 (x3214) or, or Duke’s John Graham at (919) 660-7857 or For commentary about European results, contact Tilburg’s Kees Koedijk at +31-6-55186755 or For commentary on the Latin American results, contact Gledson de Carvalho at +55 11 3799 7767 or; or Klenio Barbosa at +55 11 3799 3565 or .

Detailed results, including tabular summaries of the numbers in this release and results from previous surveys, are available at

About the survey: This is the 65thconsecutive quarter the Duke University/CFOMagazine Global Business Outlook survey has been conducted. The survey concluded May 30, 2012, and generated responses from 801 CFOs, including 444 from the U.S., 227 from Asia, 102 from Europe, and 28 from Latin America. The survey of European CFOs was conducted jointly with Tilburg University in the Netherlands. The survey of Latin America was conducted jointly with Fundação Getúlio Vargas (FGV) in Brazil. Results in this release are for U.S. companies, unless otherwise noted.

The Duke University/CFO Magazine Global Business Outlook survey polls a wide range of companies (public and private, small and large, many industries, etc.), with the distribution of responding firm characteristics presented in online tables. The responses are representative of the population of CFOs that are surveyed. Confidence ranges are reported in the online top line and banner tables for most of the numeric variables. A typical confidence range is less than one percentage point (e.g., capital spending is expected to increase by 4.9 percent with a 95 percent confidence range of 4.4 percent to 5.3 percent, which is a 0.9 percent confidence interval). Among the industries represented in the survey are retail/wholesale, mining/construction, manufacturing, transportation/energy, communications/media, technology, service/consulting and banking/finance/insurance. The average growth rates are weighted by revenues or number of employees; for example, one $5 billion company affects an average as much as ten $500-million firms would. Revenue-weighted mean growth rates are provided for earnings, revenues, capital spending, technology spending and prices of products. Employee-weighted mean growth rates are used for health-care costs, productivity, number of employees and outsourced employment. The earnings, dividends, share repurchases and cash on balance sheet are for public companies only. Unless noted, all other numbers are for all companies, including private companies.

CFO Publishing LLC, a portfolio company of Seguin Partners, is a business-to-business media brand focused on the information needs of senior finance executives. The business consists of CFO magazine,, CFO Research Services, CFO Metrix and CFO Conferences. CFO has long-standing relationships with more than a half million financial executives.

Duke’s Fuqua School of Business was founded in 1970. Fuqua’s mission is to educate business leaders worldwide and to promote the advancement of business management through research. For more information, visit

John Lounsbury


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