The FINANCIAL — According to a survey released on January 25 by the National Association for Business Economics (NABE) U.S. businesses plan to increase hiring and capital spending in the first half of this year, another sign the economy is slowly improving.
The percentage of businesses expecting to hire in the next six months exceeded the share projecting more firings by 6 points, according to NABE, Bloomberg reports. Expectations for capital spending improved for a fifth straight quarter. Companies are upgrading their outlook as sales and profits increased for a second quarter, the report showed. While current employment conditions remain negative, improved prospects for future hiring signal the two-year collapse in the job market is closer to ending.
“The U.S. recovery from the Great Recession continues, albeit at a slow pace,” William Strauss, a senior economist at the Federal Reserve Bank of Chicago who analyzed the results, said in a statement, the same source informs. “Job losses have been moderating with a slightly improved outlook for hiring.” Sixty-three percent of respondents reported that concerns over health care and environmental or tax legislation have had no effect on their hiring plans for this year. The report also showed 69 percent said President Barack Obama’s $787 billion stimulus plan passed in February “has had little impact on employment to date.”
Since the fall of 2009 demand has edged higher in the goods-producing, finance and real estate industries, while other sectors such as transportation are seeing less drastic declines in growth, according to AP. While costs have been increasing, prices also have moved higher, allowing businesses to post improved profits. Job losses, meanwhile, have been moderating with a slightly better outlook for hiring over the next six months.
Unemployment levels appeared to be easing, with the percentage of firms cutting payrolls declining to 28% from 31% in the last survey, as RTT News reports. The percentage of firms hiring edged up to 13%, while the share of respondents expecting their firms to add employees over the coming six months rose to 29% from 24%.
Output prices were expected to rise, with the share of respondents expecting price increases in the next three months exceeding those expecting cuts by 29 percentage points, according to the same source. Further, firms were confident of economic growth in the next year, with 61% of respondents expecting the real GDP to expand by more than 2% in 2010 – up from 45% of respondents in October. The NABE Industry Survey was conducted between December 18 and January 7 and presents the responses of 75 NABE members regarding business conditions in their firm or industry.
And "while the transportation, utilities, information, and communications (TUIC) sector saw declining demand, the pace of decline slowed dramatically from early 2009," the NABE report says, according to ImarketNews.com. The NABE says "all respondents are again indicating that business decisions are being made based on expectations of positive economic growth in 2010, as measured by real GDP." The survey found that 61% of 75 survey participants believe real GDP will expand by more than 2.0% in 2010 — up from 45% of respondents in October.
The report says profit margins expanded for a second straight quarter, "though the degree of improvement was again modest.""A smaller share of respondents reported rising profitability compared to results in the October 2009 survey, but the proportion citing eroding margins decreased by an even greater amount," it adds, as the same source reports. In a possible sign of incipient inflation pressures, the survey found that "for the second straight quarter, price increases were more common than price cuts." "Only 8% of respondents reported that their firms had cut prices last quarter, compared with 22% that had raised prices," it says. "Expectations for price increases in the coming quarter out-ran expected price cuts by 29 percentage points."
Fewer businesses planned to spend on structures, the survey found, according to Reuters. It also found that a small number of businesses were building inventories in anticipation of stronger sales, but a large number were still cutting back accumulated stocks of unsold goods to manage costs and conserve cash.
The rebuilding of inventories is one of the key factors expected to contribute to strong growth in the fourth quarter, the same source reports.