CEOs say it’s the uncertainty of the situation more than specific issues that is driving their forecast down, although the list of concerns they shared continues to grow each month. Among those: market volatility, a chaotic geopolitical scene, uncontrolled inflation, record-high oil prices, and continued labor and supply chain shortages are all adding to the mix fueling doubts over the future.
“The economy runs on oil, and until we get more, things are not getting better,” said Darrel Box, CEO at Lafayette Regional Health Center in Lexington, Missouri, who also lists labor and supply costs and shortages as reasons for his 4 out of 10 rating of business conditions 12 months from now (considered “Weak” according to our 10-point scale points).
“Supply chain issues remain and do not seem to be getting any better,” said the CEO of an electronic component manufacturer participating in the poll. “Finding people is another major problem, so even if we find the parts, we will still have issues executing.”
Labor Shortages
Challenges with talent acquisition resonated as a top issue for CEOs in our June polling. Many reported that demand has remained unrelentingly strong despite inflation, but finding ways to fill orders without sufficient resources is impeding growth.
“Labor and supply issues are buffering continued demand in excess of our ability to respond,” said the CEO of a large commercial truck dealership.
“We are in the recruitment space, and the demand on the client-side is strong, [but] the job seeker side is challenging,” said the CEO of a midsized recruiting firm.
“We are a design build construction company that specializes in warehouses and industrial buildings and our opportunities are unlimited… if we had the people to perform the work,” said F. Douglas Reardon, president of family-owned construction company EXXCEL Project Management.
“There is quite a bit of uncultured value in the economy that organizations know how to capture. The biggest challenge in capturing it is the labor shortage,” said Danny Gutknecht, CEO and co-founder of Pathways, a small HR firm in Glendale, Arizona.
“Tech bubble bursting is probably beneficial for us,” said the CEO of a tech consultancy. “A lot of these VC-backed product tech companies are driving up salaries in the space and making it hard for professional services firms to keep up salary wise. A reality check and market correction will help normalize across the industry.”
“I need staff, but wages for entry-level positions are very high,” echoed the owner and CEO of a small professional services firm. “I think more potential clients are going to put projects on hold.”
Several polled CEOs also mentioned customers now taking longer to make buying decisions due to uncertainty over the future. The CEO of an industrial manufacturing company in Pennsylvania said these very fears of worsening conditions are also, by themselves, driving down optimism.
“There is growing sentiment that things are going to slow down… which will cause things to slow down,” he said, adding inflation was also a big factor behind the hesitation.
Political Divide
Amid all these challenges, CEOs say they’re most frustrated with Washington and the decisions made by Congress, which, they say, are preventing business from ramping up and getting the U.S. economy on track to a recovery.
“Unprecedented quantitative tightening that is in response to gross monetary policy from a government and central bank that has printed money like it grows on trees,” said Dan Levin, co-founder, president and COO at ViralGains, a digital video advertising company. “The level of growth we’ve seen, not just the last couple of years but decade, was unnatural and not rooted in proper fundamentals.”
“With the national debts at the highest level as they are, the administration will realize that keeping printing money is not the answer; it’s people getting back to work with their permanent jobs,” said Andrew Ly, co-founder and CEO of Sugar Bowl Bakery. “This administration’s ability to repay its debts depends on low-interest rates. They will need to do something today moving forward to tackle it.”
“We need a federal government that will use USA resources, fuel and activities to grow from the USA out,” said Christopher Carter, CEO of SAP company Approyo. “Because of the failures in the federal government, we feel the growth [will be] slowing until they work with businesses to allow us to succeed.”
“We need leadership in Washington to focus on key drivers,” said the president and CEO of a publicly traded retailer, citing high gas prices and labor shortages as part of those issues. “We will not build sustainable growth without affordable energy, a motivated workforce and an efficient supply chain.”
“Wages cannot keep up with this inflation, and frankly, the current administration just doubles down on bad ideas daily,” said Paul Lefebvre, CEO of Illinois-based Specialty Print Communications.
“Inflation is too high, supply chain is too constrained. I suspect we are going to see reduction in demand leading to massive cancellations of backlog that will cause many companies to overact with layoffs. Government policy will likely make matters worse and prolong recession,” said Dan Call, president at New Prague, Minnesota-based WINCO Generators
Summing up general sentiment: “Economy will not take off until politics get out of the way,” said the CEO of a mid-sized transportation company.
No Recession
Despite the gloomy forecast for the year to come, the majority of CEOs polled say they only anticipate a slowdown of the U.S. economy over the next 3 to 6 months; less than a quarter expect a full-on recession.