If you're a job seeker in financial services, you don't need a survey to remind you about how bleak things look. If it's not the recent LIBOR scandal throwing even more volatility into the global markets already hit by a Eurozone debt crisis, the Supreme Court's decision on health care and the upcoming presidential elections, uncertainty would appear to be paralyzing most companies' plans around hiring and growth. Guess what?
A new survey of chief financial officers that reflects an "alarming decline" in optimism toward their businesses and especially the global economy also finds an amazing revelation that nearly six out of 10 (58 percent) believe their companies are planning to hire, at least in the U.S.
Europe is a different story all together.
The "CFO Outlook Survey" conducted by Financial Executives International (FEI) and Baruch College's Zicklin School of Business shows that despite uncertainty and predictions on a prolonged recovery starting in 2014, U.S. CFOs believe their companies are pushing forward with plans to hire and increase wages, and demonstrate confidence in their risk management.
Respondents to the quarterly survey, which polls CFOs of public and private businesses, primarily in the U.S., Europe (Italy and France), Mexico and Japan on their economic and business confidence, revealed some of its lowest marks in optimism toward the global economy since the question was added in 2010.
European Optimism Drops Significantly
European CFOs' optimism in the global economy dropped significantly to 43.2 (from 54.00 in Q1), while their level of confidence in their own companies decreased to 54.50 (from 58.30 in Q1).
U.S. CFOs confidence in the global economy also diminished this quarter, falling nearly eight points to 44.1 (from 51.9 in Q1); optimism in their own companies dropped to 67.80 (from 70.80 in Q1).
The CFO Optimism Index for the U.S. economy saw similar trends as it declined nearly five points to 55.40 (from 60.60 in Q1). Although U.S. CFOs are less optimistic and expect costs to increase in a number of areas including health care, technology, capital expenditures and compensation, they expect significant increases in revenues (11 percent) and net earnings (15 percent) in the next 12 months.
In sharp contrast, European CFOs expect modest increases in costs and revenues with practically no increase in net earnings.
Significant Number of American CFOs Plan to Hire
A significant number of U.S. CFOs (58 percent) plan to hire additional employees at their companies in the next six months and anticipate wage levels remaining the same (55 percent) or increasing (45 percent). This is in direct contrast to Europe where CFOs do not anticipate hiring additional employees (64 percent report they will not) and project wage levels to remain relatively stable (75 percent). Overall, European CFOs expect their countries' average unemployment rate to climb to 10.3 percent over the next year, in contrast to U.S. CFO expectations that the U.S. unemployment rate will average 7.8 percent during the same period.
CFOs this quarter also weighed in on the ongoing investigations into large multinational banks' alleged manipulation of LIBOR. Despite the LIBOR scandal, the majority of CFOs still feel the same about the integrity of their principal banking partner (75 percent of U.S. CFOs, 52 percent of European CFOs).
The majority of CFOs also feel that regulators' ability to protect the financial system and bank customers have remained the same. More than a third of U.S. CFOs have less confidence in regulators (39 percent) while only a handful are more confident (3 percent).
The percentage of European CFOs responding to the survey who were more confident (19 percent) in regulators was much higher than that of their U.S. counterparts. However, in terms of managing risk, U.S. CFOs showed more confidence in risk controls and the risk management process (86 percent), a likely direct result of Sarbanes-Oxley which is celebrating its 10th anniversary. Fewer CFOs in Europe showed confidence in risk controls (65 percent).
"Having faced a turbulent economic environment in the first half of 2012, CFO confidence has understandably begun to erode," said Marie Hollein, President and CEO of Financial Executives International. "With an upcoming presidential election in the U.S., economic turmoil in Europe and ongoing widespread investigations into financial institutions, there are credible reasons for the dip we have seen in CFO confidence. Still, many CFOs expect for company revenues to increase, a good sign for hiring, especially in the U.S. as well as increased capital spending and investments made in both staff and equipment."
As the European financial crisis continues, CFOs expressed different feelings in regards to the future of the European Union. While CFOs agree on a global basis regarding the status of the European Union in six months ("status quo" was the top choice for more than a third of CFOs in both regions), 42 percent of European CFOs forecast consolidation one year from now, with 29 percent expecting a recovery. This is in contrast to U.S. CFOs who suggest the EU may face "dissolution" (24 percent) or recovery (20 percent) one year from now.