CEOs losing optimism as jobs slowdown imperils growth in US

US chief executive officers are turning more pessimistic about a second-half recovery as rising unemployment and Europe’s debt turmoil threaten domestic growth prospects.CEOs from General Motors to Hewlett-Packard to Manpower say they are concerned about the health of the US economy. While economists predict a continuing expansion this year and next, executives see a mounting number of obstacles that could clip growth.US employers added the fewest number of workers to their payrolls in a year last month, while companies including Tiffany & Co and mattress maker Tempur-Pedic International cut their full-year forecasts. European policy makers are also struggling to resolve a crisis that has tipped at least eight of the 17 euro-area economies into recession. The US presidential election is another area of concern, CEOs said.“There are so many uncertainties,” said Jeffrey Joerres, CEO of Manpower, the Milwaukee-based provider of temporary workers. “If these uncertainties keep stacking up and none get resolved, we’ll see a hiring pause rather than the current slowdown.”After a 1.7% expansion last year, US gross domestic product may increase by 2.2% in 2012 and by 2.4% in 2013, the median of 70 economists surveyed from June 1 to June 5 shows. The estimates are down 0.1 percentage point from those issued last month.CEOs see jobs as a key driver of growth, even as they keep a lid on their own spending and hiring. Supervalu’s Albertsons grocery store chain said this week it will cut as many as 2,500 jobs. Hewlett-Packard has announced the biggest round of job cuts out of any US company this year, at 27,000, according to data compiled by Bloomberg.“The economy seems to be just sort of bouncing along,” Hewlett-Packard CEO Meg Whitman said in an interview this week. “It doesn’t seem to be getting significantly better.”Employment concerns, coupled with sinking housing prices, have made US consumers reluctant to undertake big-ticket home renovations, said Lowe’s Cos. Chairman and CEO Robert Niblock. Lowe’s, the second-biggest US home-improvement retailer after Home Depot, is eliminating more than 500 corporate positions through voluntary buyouts this year after cutting 1,700 store management jobs in 2011.“From a macroeconomics and jobs standpoint, we are trying to be sufficiently cautious in our outlook,” Niblock told reporters after the company’s annual shareholder meeting on June 1. “It’s always, ‘Well, the second half of the year or next year is going to be better.’”That sentiment may be fading. Lowe’s reduced its full-year earnings forecast last month and was joined this week by Tempur-Pedic, the mattress maker that plunged a record 49% after lowering profit and revenue predictions for 2012. Tiffany last month also cut its full-year profit and sales forecasts after revenue at its flagship store fell, hurt by cuts to Wall Street bonuses and fewer European tourists.The Standard & Poor’s 500 Index has declined almost 7% from a four-year high on April 2.The May jobs report, which showed the US unemployment rate rose to 8.2% from 8.1% a month earlier, “cemented our point of view that this is a low-growth environment,” Carol Tome, chief financial officer of Home Depot, said in an interview on Wednesday.General Motors CEO Dan Akerson said last month that he’s “guardedly optimistic” about the economy. GM, the largest US automaker, led five of the six biggest car companies last week in reporting US monthly sales gains that trailed analysts’ estimates as incentive offers failed to draw enough buyers.“It’s fragile,” Akerson said about the economy in a May 14 interview in New York. “When people have confidence that they’ll have a job and that their homes are safe and whatnot, they tend to spend more and that tends to drive demand.”While last month’s unemployment rate has fallen from a peak of 10% in October 2009, consumers and companies are still restrained. Randall Stephenson, CEO of AT&T, the largest US phone company, said last month that telecommunications spending by large companies is focused on operating more efficiently, not expanding.The real driver is businesses “hiring and putting people on payroll,” Stephenson said in a May 10 interview. “We’re still not seeing that.”Bob Evans Farms said last week it would increase so-called value offerings at its namesake restaurant chain, which already sells 10 meals for less than $20 each.“We’re hitting value hard and we don’t see that changing anytime soon,” CEO Steven Davis said on a June 6 conference call.A consumer pullback in Europe would also hurt all types of businesses, according to Hewlett-Packard’s Whitman. The debt crisis and the possibility that Greece may withdraw from the euro area is causing “a lot of uncertainty in Europe,” she said. “Uncertainty is not business’s best friend.”Analog Devices chief financial officer David Zinsner said in a May 22 interview that a further deterioration in Europe combined with slower growth in China could push sales to the bottom of the company’s predicted range. The Norwood, Massachusetts-based semiconductor maker already predicted sales for the quarter ending in July that fell short of some analysts’ estimates.The US presidential election in November is another wildcard, according to Niblock, the Lowe’s CEO. While President Barack Obama will argue he’s brought the US out of the worst recession since the Great Depression, his Republican opponent Mitt Romney is saying his policies haven’t worked.“We expect it to be touch and go, a little rocky between now and the election,” Niblock said.