Roughly a fifth of American companies are looking to scale down their workforce in the coming months as businesses come under pressure of low margins, with many foreseeing an economic recession, according a January survey by the National Association for Business Economics (NABE).
According to the survey, almost 20 percent of respondents expect employment at their firms to fall in the coming months. “For the first time since 2020, more respondents expect falling rather than increased employment at their firms in the next three months. Fewer respondents than in recent years expect their firms’ capital spending to increase in the same period, said NABE president Julia Coronado, founder and president of MacroPolicy Perspectives LLC, according to a post by the NABE.
Only 12 percent said that their headcount will increase during the next three months, which is less than half the share of firms that reported boosting employment over the past three months. Sixty-three percent reported wages rising in the past three months, unchanged from the October survey.
“The results of the January 2023 NABE Business Conditions Survey indicate widespread concern about entering a recession this year,” Coronado said. More than 50 percent of respondents see the possibility of a recession over the next year at 50 percent or higher.
The January survey covered 60 NABE members and was conducted between Jan. 4 and 11, reflecting fourth-quarter 2022 results and a near-term outlook.
Tough Business Environment
The NABE survey found that businesses are facing challenging conditions. According to respondents, the biggest downside risks to their economic outlooks are higher costs and interest rates.
Profit margins remained under pressure, down to negative 25 Net Rising Index (NRI) in the January survey from negative 10 NRI in October. NRI refers to the percentage of panelists reporting positive values minus those reporting declining values.
The last time profit margins were at this level was in the mid-2020 surveys. The profit margin outlook for the next three months has improved, moving to negative 7 NRI from negative 17 NRI.
As the share of respondents reporting falling wages declined to zero, the NRI for wages rose from 55 in October to 63 in the latest survey. The NRI for expected wage costs over the next three months also jumped, moving from 43 in October to 63 in January.
“The survey results reveal an unevenness across indicators,” said NABE Business Conditions Survey chair Carlos Herrera, chief economist, Coca-Cola North America, according to the NABE post.
“Wages rose at a majority of respondents’ firms in the last three months of 2022, and more firms added workers than reduced headcounts. But far more firms than in the past three years reported falling profit margins.”
Layoffs in 2023
Other surveys have also found that several companies intend to lay off workers this year. According to a Resumebuilder.com survey of 1,000 business leaders in December 2023, 61 percent expect their organizations to lay off workers in 2023.
Out of the respondents who expect layoffs, 57 percent believe that 30 percent or more of their employees would be terminated this year.
The survey found that 70 percent of companies are likely to implement a hiring freeze this year, with 74 percent of leaders agreeing that it would be easier to fire poor performers in 2023 due to employees losing “bargaining power.”
Google’s parent company Alphabet recently announced that it would eliminate 12,000 jobs. Microsoft intends to cut 10,000 jobs, or roughly 4.5 percent of its global workforce. Amazon announced 18,000 layoffs earlier this month, which includes terminations conducted in November.
Salesforce plans to lay off 10 percent of its 80,000-strong workforce. Goldman Sachs will spend $275 million on terminating 3,200 jobs.