Why are CFOs gloomy about the future?
Every quarter, Deloitte asks financial leaders how they’re feeling about the economy — their hiring plans, their risk tolerance, their biggest worries. This week’s report says the CFOs are feeling pretty pessimistic.
They expect to hire fewer people than they said they would last year, and about a third as many respondents said it’s a good time to take economic risks. This comes amidst cooling inflation and a relatively strong job market — both of which are good signs … right?
The cause for the pessimism is pretty clear to John Goff. He’s senior manager at Deloitte, which released the report.
“If you ask CFOs the one thing they like the least, it’s uncertainty,” he said.
And in 2024, there is no shortage of uncertainty. Economics professor Ahmed Rahman at Lehigh University is quick to point out the obvious one: There’s an election in less than two months, and the candidates have widely different views.
“We see this big difference in economic prescriptions, and we don’t know — the election is extremely close,” he said. “So that’s part of the uncertainty.”
On top of that, the newly elected Congress will decide whether to extend former President Donald Trump’s 2017 tax cut, which expires next year.
“Seems to me that CFOs are worrying about what tax code roulette is going to do to their business,” said Georgetown finance professor Jim Angel.
Businesses have spent the past seven years paying fewer taxes and reaping more profits, he noted. “Now, of course, the problem is we have a massive deficit — yeah, highest ever in peacetime. Something’s gotta give.”
We can also add the wars in Ukraine and Gaza to the uncertainty column.
“And what that means is that vital elements of your supply chain may get cut off,” said Angel.
But those are all temporary concerns. Ian Williamson, dean of the business school at UC Irvine, thinks the biggest issue is a structural problem with the workforce.
“This has been an issue that has been looming and growing for at least a decade,” he said. “In the United States, we simply are running into a shortage of people.”
Talent is usually one of the top concerns in this survey. It’s lower on the list this time as the labor market cools, and unemployment slowly creeps higher.
“But that number is still very low relative to, you know, what we would have historically seen as even close to a high unemployment number,” Williamson noted.
Williamson doesn’t think that problem is going away soon, but he said CFOs could be more confident in next year’s reports anyway — the election will over by then, and the outcome isn’t necessarily as important as the certainty that comes with it.
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