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Union strikes from Detroit to Hollywood have demonstrated workers’ strength and turned the tide after decades of labor movement weakness, but signs are mounting in the nationwide labor market that the post-pandemic era of workers’ control over wage and job growth is coming to an end.
Throughout the year, and going back to 2022, the challenge of finding qualified workers Open positions Wage growth has been among the biggest inflationary forces for businesses, and wage growth has been among the most closely watched inflationary forces at the Fed and within senior officials. Now 60% of chief financial officers surveyed by CNBC say it’s easier to find and hire qualified workers for open positions than it was last year. That represents a 25 percentage point increase from the previous quarter, when 35% of CFOs held that view, a magnitude of quarterly change that is rare in this quarterly survey series.
There was already an indication in CNBC’s Q3 CFO Council survey that there was a shift underway in this view of the balance of power between workers and employers from within the C-suite, with 50% of CFOs at the time saying conditions in the labor market It was “about the same” – that is, at least skilled labor was no longer difficult to find and employ. But now he was leaning. And last quarter, there were still 15% of CFOs saying it was still harder to find employees than it was a year ago, a view that had all but disappeared from the survey group.
The CFO’s statements are in line with growing headlines this year that the big quit is over, and strong data and sentiment indicators from the labor market show the Fed’s rate hikes are smoothing things out, from job growth to wage growth. The latest Nonfarm Payrolls report showed that the resilient economy is still adding jobs, but at a slower pace than expected. Unemployment rates rose, wage growth continued to decline, and “Smoking cessation rate” It has stabilized from the escalation of the epidemic. The Glassdoor employee sentiment index fell to its lowest level since 2016 this fall.
CNBC’s CFO Council Survey is a sample of the opinions of chief financial officers at major companies, which included responses from 30 CFOs recorded between Nov. 14 and November. 24.
The CFO’s view of the labor market also carries over to their broader view of the economy and markets, which changed in other big ways over the four quarters of CNBC’s survey this year. Financial managers started 2023 somewhat pessimistic, for reasons that are easy to understand: inflation, aggressive interest rate hikes by the Fed to control it, and stocks entering a tailspin in the fourth quarter of 2022.
About a year later, the market rebounded on the conviction that inflation had been overcome and the increases had ended. Optimism is growing among CFOs as well. That may not match the enthusiasm of stock investors, which pushed the Nasdaq up more than 10% this month, but the results of the Council of Financial Directors’ fourth-quarter survey suggest a more positive view of the market and the potential for a soft landing.
Here are some highlights from the additional survey:
Fear of inflation has reached its lowest levels.
No surprise here, given the recent readings from the CPI and PPI reports, but the Q4 survey found a quarterly decline for CFOs (7%) citing inflation as the biggest risk to their business.
Inflation’s victories come at a cost.
Recent earnings reports and commentary from consumer giants, including Walmart, Best Buy and Home Depot, have included warnings about the consumer despite continued spending. The Fed may have the upper hand on inflation, and wage growth may slow, but this is also leading to more concerns about consumer demand, with 33% of CFOs citing it as their biggest external risk, the highest it has reached among risk factors across the board. the whole world. Four quarterly surveys this year.
Stocks could continue to move higher.
Throughout the history of this survey, CFOs have tended to ignore market noise. But the fourth-quarter survey found that upside among CFOs is at its highest levels this year. More than 40% of CFOs say the Dow Jones Industrial Average is more likely to reach 40,000 than to fall below 30,000. Only one in four (27%) believe a bearish result for the Dow is more likely. In the Q1 survey, only 13% of CFOs thought the 40,000 mark was on the horizon, and even just a quarter ago, only 25% of CFOs saw hitting 40,000 as likely. On a comparative basis, the Dow Jones has plenty of room to rise. It’s up just 6% this year, versus 19% for the S&P 500 and 37% for the Nasdaq Composite.
This does not mean that “soft landing” is now the majority view.
CFOs who expect a soft landing for the economy are now more numerous, with 37% of Q4 respondents holding that view. This is more than double the CFOs who described a soft landing in the first quarter, and continues the rise seen in the third quarter survey, when it reached 30%. But stagnation is still the most common view. Half of CFOs expect a recession in the next year – 20% in the first half of 2024, and 30% in the second half.
Inflation will not return to normal anytime soon.
One survey found that CFOs have been consistent throughout 2023 is that inflation will not return to the Fed’s 2% target any time soon.
Financial managers are increasingly giving the Fed high marks for its battle with inflation. Those who describe the Fed’s efforts as “good” are now the majority view, at 53% of respondents, compared to 40% in the first quarter. The proportion of CFOs who rate the Fed’s actions as “weak” has fallen from 17% in the first quarter of the year to 7% now. But the CFO’s view on when inflation will return to 2% continues to push forward.
In the fourth quarter, 83% of CFOs say that won’t happen until 2025 or later, compared to 75% last quarter. Even with inflation at multi-year lows in both consumer and wholesale indices, expectations of higher inflation have been rising among consumers over the past two months, a worrying sign for the Fed, and it is clear from CFOs that even if the Fed… The Fed is winning the battle, it is a long road to complete surrender.
Most CFOs don’t expect interest rate cuts to begin until September 2024
With inflation under control, but Fed bosses saying it is too early to declare victory, and CFOs anticipating a slow march back to the 2% target rate, it is not surprising that only a third of CFOs expect interest rate cuts to begin sooner than September next year. (Immediately following the Fed’s annual economic symposium in August in Jackson Hole.) About 27% of them see June or July as the most likely time to start cuts, but 30% of CFOs say it will be 2025 before the Fed cuts. And 14% say November or December next year. That’s more hawkish than the market, which is currently betting that the Fed could start cutting interest rates by May.