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Forget the Happy Talk: Longer, Deeper Recession Lies Ahead, Execs Warn
Originally published in This Can't Be Happening yesterday, 22 December 2009
Joseph Stiglitz, a former chief economist at the World Bank, warns the US economy will slip back into a decline in the coming year, and says the government should act now to help state and local governments, which are running out of money, and to create new jobs.
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 AFP, 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."
About the author: Philadelphia journalist Dave Lindorff is a 34-year veteran, an award-winning journalist, a former New York Times contributor, a graduate of the Columbia University Graduate School of Journalism, a two-time Journalism Fulbright Scholar, and the co-author, with Barbara Olshansky, of a well-regarded book on impeachment, The Case for Impeachment. His work is available at www.thiscantbehappening.net.
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Baltimore News Network, Inc., sponsor of this web site, is a nonprofit organization and does not make political endorsements. The opinions expressed in stories posted on this web site are the authors' own.This story was published on December 23, 2009.