Survey Finds Financial Firms Will Continue to Downsize in 2012 While Other Sectors Increase Their Workforces

U.S. finance chiefs plan to expand their workforces by 1.5 percent on average over the next year, an increase that would yield an unemployment rate of approximately 8 percent compared with today’s 9 percent rate, a new survey finds. Unfortunately for the financial sector, CFOs at financial firms expect some modest reductions in their workforces over the next 12 months, the survey finds.

The latest Duke University/CFO Magazine Global Business Outlook Survey, concluded last week, asked 1,050 CFOs from a broad range of public and private companies in the U.S., Europe and Asia about their expectations for the economy.

The largest employment increases are expected in the transportation and energy sectors and in services/consulting, with both finance and media firms expecting mild workforce reductions.

More Optimism Among U.S. CFOs

On the upside, U.S. CFOs rated their optimism in the nation’s economy at 53 this quarter (on a scale from 0 to 100), higher than the recession low of 40 in March 2009, but lower than the long-run average of 60.

Business spending plans also showed signs of recovery this quarter: U.S. firms plan to increase capital spending by nearly 8 percent over the next 12 months, up from 4.5 percent in last quarter’s survey. Tech spending should increase by 6 percent and research/development and marketing and advertising spending are expected to grow 2 to 3 percent.

On the other hand, U.S. CFOs believe there is a 31 percent chance the U.S. economy will enter recession in the next six months, according to the findings.

“Even more worrisome than CFOs’ recession fears is that 46 percent of CFOs have no plan in place to deal with a recession next year if it happens,” Campbell Harvey, a Fuqua finance professor and founding director of the survey, said in an announcement.

Return of Recession Would Bring More Cuts

The survey asked the 54 percent of CFOs who have a contingency plan what they would do should a recession occur. “CFOs would slash employment by 8 percent and hack investment spending by 30 percent. And let me emphasize, that is from today's already depressed levels,” Harvey said.

CFOs said they are willing to “cut into the bone” in the event of a recession. The survey shows 69 percent would cut discretionary spending, such as research and development. “Cutting R&D reduces future growth opportunities and destroys long-term value,” Harvey stated.

Europe Optimism is Down

In Europe, optimism is down and very little to no growth expected in hiring, business spending or earnings.

Asian CFOs were the most optimistic about 2012, but the outlook has dimmed somewhat: Asian CFOs’ optimism rating declined to 57 from last quarter’s 60.