The National Association of Business Economics (NABE) said on Oct. 26 that job losses appear to be slowly abating with the percentage of firms cutting payrolls falling to 31% from 36%. The percentage for firms adding jobs doubled from an all-time low of 6% in July to 12% in October.
Respondents of the survey expecting their firms to add employees over the coming six months exceeded the number expecting job cuts for the first time since the recession began.
The NABE Industry Survey, released on Oct. 26, showed that industry demand increased during the July to September period for the first time in five quarters. The goods producing; finance, insurance, and real estate; and services sectors all saw growth in the unit volume of demand. The transportation, utilities, information, and communications sector was the only broad industry group to post a decline.
"This provides new evidence that the U.S. recovery is underway," said William Strauss, Federal Reserve Bank of Chicago. Industry demand expanded for the first time in five quarters and all panelists are expecting growth next year. While input costs have been increasing, prices have also been moving higher, allowing profits to improve. Job losses have been moderating with an improved outlook for hiring over the next six months. Capital spending was positive for the first time in a year. Improving credit conditions might be part of the explanation, with respondents indicating that credit remains tight but less so than earlier in the year."
Other highlights of the survey include:
- All 78 NABE panelists indicated that business decisions are being made with the expectations that economic growth, as measured by real GDP, will be positive in 2010. Some 73% of firms believe real GDP will expand between 1% and 3% in 2010.
- Profit margins widened for the first time in seven quarters, albeit at a modest pace. While goods-producing industries continued to experience compression in profit margins, the other three broad industry groups all recorded gains.
- Price increases were more common than price cuts last quarter for the first time in a year. The share of respondents expecting price increases in the next three months exceeded the share expecting cuts by 15 percentage points, a margin not seen since July 2008.
- For the first time since October 2008, more respondents reported a rise in capital spending over the prior quarter than a decrease. Expectations for future capital spending improved for the fourth straight quarter and turned positive, on balance, for the first time in a year. As in the past two surveys, expectations were positive for spending on computers and communications equipment but negative for structures.
- Materials costs appear to be increasing with the percentage of respondents noting rising prices slightly outpacing respondents reporting price declines. Labor costs remain extremely subdued, with only 9% of respondents reporting rising compensation.
- A large but declining share of respondents indicated that credit conditions had a negative impact on their businesses during the third quarter of 2009, compared to the prior period. In addition, the number of panelists reporting a positive impact from credit conditions has also increased.
- The majority of respondents indicated a reduction in inventories, but the percentage declined from the previous two surveys. Forty-six percent of firms reported that inventories were reduced during the third quarter; many of these firms indicated that the reduction in inventories reflects a need to cut costs and conserve cash. At the same time, 18% of firms reported building inventories in anticipation of stronger sales.
- 38% of respondents reported an increase in sales because of the fiscal stimulus enacted in February 2009, suggesting that the stimulus has had an impact for some firms, but that a majority of firms have yet to see tangible benefits.
