Contrary to the disappointing jobs report from the Bureau of Labor Statistics last week, CFOs say they still plan to hire at a relatively strong pace, according to the latest Duke University/CFO Magazine Global Business Outlook survey released Wednesday. U.S. finance chiefs say they will expand their full-time domestic workforce by 2.5% on average over the next 12 months, a bump that could bring the unemployment rate to 7% from its current 8.2% by the end of the year.
Of the more than 400 U.S. CFOs surveyed in this 65th consecutive quarterly survey, nearly 30% say their employees are working at maximum capacity, and 60% say they are looking to add staff. Finance chiefs say they will also increase their hiring of temporary employees (by just under 1%) and expand their offshore, outsourced workforce (by 4%).
Despite CFOs’ plans to boost head count, though, the CFO Optimism Index fell this quarter, as 801 finance chiefs around the globe grew gloomier. U.S. finance chiefs rate their optimism about the domestic economy at 56 out of 100, compared with 59 last quarter. The outlook of CFOs in Asia dropped notably, falling from 65 last quarter to 58 in May, marking the first time in the history of the survey that traditionally more optimistic Asian CFOs aligned with their U.S. counterparts. In Europe, CFO optimism lags other regions — not surprisingly, given the ongoing sovereign debt crisis — coming in at 52 out of 100.
U.S. CFOs cite consumer demand as their top concern, followed by worries about price pressure from competitors and federal government policies. Global financial instability also continues to weigh on them.
But U.S. survey respondents say they are still planning to spend money in critical areas. Technology leads the major spending categories, with CFOs reporting an average 8% increase in outlays for tech during the next 12 months, up from 6% last quarter. CFOs also say their companies will boost capital spending by 5% on average in the coming year, down from 7% last quarter. Spending for both research and development and marketing and advertising is projected to rise by 3%, in line with CFOs’ stated plans last quarter.
As they look for growth, 39% of finance chiefs say their companies are spending money in pursuit of major innovation: investing in projects that, if successful, would have a substantial impact on the business. On average, CFOs say their companies are spending about 15% of their total budget on innovation efforts.
Even with plans to augment spending, CFOs continue to keep a close eye on cash, with their companies’ cash holdings as a percentage of total assets rising from 16% to 17% over the past year. Slightly less than half the survey respondents say they plan to deploy some of their cash in the next 12 months, with capital spending winning the largest share of the dollars, followed by spending on acquisitions and paying down debt. Most of the finance chiefs who plan to continue to hold on to cash point to the need for a liquidity buffer in times of economic uncertainty.
In Europe, finance chiefs say hiring, R&D, and advertising spending will all be relatively flat over the next year, while capital spending and earnings are both expected to decline. European CFOs plan to hold cash, citing liquidity concerns and economic uncertainty in the region, as well as a lack of attractive investment opportunities.
Meanwhile, with slowing economic growth in China and elsewhere, CFOs in Asia are growing more pessimistic, citing intense price pressure from competitors, weakening demand, and global financial instability as top concerns. Competition for workers continues to be fierce in the region, with finance chiefs planning to boost wages by 7% on average during the next year. Over the same time period, CFOs in Asia plan to expand their full-time workforce by 3%.