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Analysis: Economic worry tightens CEOs' grip on spending By Scott Malone Posted 2012/06/01 at 2:26 pm EDT BOSTON, June 1, 2012 (Reuters) — CEOs will hold their wallets a little bit tighter heading into thesummer after the long-awaited recovery in U.S. employment stumbledin May. The United States had been a relative bright spot this year in atroubled world economy coping with Europe's debt crisis and acooling Chinese economy. But a weaker-than-expected May jobs reporton Friday gave corporate America fresh worries. AT&T Inc was one company that was not surprised by thedisappointing jobs numbers as it has seen a lack of hiring at bothbig and small corporate clients. Fewer employees at these companiesmeans fewer phone lines, which hurts AT&T's growth prospects. "We are not seeing any hiring in the upper end of business in theU.S.," said Randall Stephenson, chief executive of the biggest U.S.phone company by revenue, told an investor conference in New Yorkon Friday. "People aren't hiring a lot in the U.S," he said. At smaller companies, Stephenson said, the situation was worse. "Asyou go down-market, it's getting tighter and tighter, and you'reseeing the wallet for investment being less open." The U.S. economy slowed its pace of job creation in May, addingjust 69,000 jobs, the lowest monthly rate in a year. That, coupledwith downward revisions in the number of new jobs added in Marchand April, helped push the unemployment rate up to 8.2 percent from8.1 percent. The data raised fresh worry about the stability of the nation'slong, uneven recovery from the 2007-2009 recession and spookedinvestors, who sent the widely watched Standard & Poor's 500stock index down more than 2 percent. Other data on Friday showed European factories slowed further inMay, while China's manufacturing sector barely grew. In a sign of weakening consumer spending, automakers General MotorsCo, Toyota Motor Corp and Chrysler Group LLC also reportedweaker-than-expected U.S. sales in May. "Over the last 30 days or so, the economic indicators came in justa little softer than in the first quarter," Ford Motor Co SeniorEconomist Jenny Lin said on a conference call. VICIOUS CYCLE Worries about the recovery have locked the U.S. economy in avicious cycle -- companies are waiting to see strong growth beforethey take on significant new numbers of employees, but that growthis being held back by high unemployment. "Two big areas are causing companies to pull back on theirrecruitment," said Scot Melland, CEO of Dice Holdings Inc, whichruns websites companies use to recruit technology and financeworkers. "One is concern about the global economy and concernsabout Europe. The second is what's going to happen in the U.S.," hetold Reuters. "It's nervousness about the election and regulationand taxes. It's uncertainty about what the business environment isgoing to be like." U.S. President Barack Obama and his Republican rival, formerMassachusetts Gov. Mitt Romney, have made the economy a centerpieceof the campaign. The uncertain environment has CEOs keeping a tight rein oncorporate spending. Inge Thulin, who took over as CEO of diversified U.S. manufacturer3M Co in February, said that was one reason he was maintaining thecompany's matrix management structure. Its operations around worldare overseen both by their global divisions, which make productslike Post-it notes and bandages, and regional executives. "It is a volatile situation economically," Thulin told the SanfordC. Bernstein Strategic Decisions conference in New York. "In timeslike this, where you need to really make sure that you have 24/7control of management relative to cost, that needs to be donelocally, that needs to be done hands-on locally every day." READY FOR TROUBLE Some companies, including General Electric Co and HoneywellInternational Inc, readily admit to slowing demand in Europe,though they also contend that U.S. demand has been better thanexpected this year. "The U.S... has really been terrific and across the board andgreater than we would have we expected. Europe is weaker," saidDavid Anderson, chief financial officer at Honeywell, which makesproducts ranging from thermostats to cockpit electronics. "We'reseeing the challenges now in terms of the commercial impact of(Europe's) financial and political stresses showing up in ournumbers." Honeywell has planned how it would cut costs in the wake of a sharpdownturn in Europe but has not rushed to do so, Anderson said. "We're being smart about it and we've got contingencies but it'snot affecting how we're actually executing," he told theconference, adding that even in Europe, when the company finds aninvestment that it thinks will pay off, "we're continuing to fundthat." The memory of the financial crisis is still fresh for many top U.S.executives, who cut staff and other costs aggressively in the faceof the worst downturn of their lifetimes. That, some assert, leavesthem ready to handle another downturn should one arise. GE Capital, for instance, this month said it was further cuttingback the amount of commercial paper it issues, to about $25 billion-- less than a quarter of the short-term debt it had outstanding inearly 2008, before that market briefly locked up and threatened thelargest U.S. conglomerate's finances. It is taking that step even though investors have a strong appetitefor commercial paper right now, said Michael Neal, GE Capital'sCEO. "I don't think there is any issue with it right now," Neal told theBernstein conference on Thursday, noting that "99.9 percent of thedays there is no issue with that. It's that you have to build thatstrategy around that one bad day that is out there. So I would justtell you that we have learned our lesson." (This story is filed to correct spelling to \"Stephenson,\"paragraph 5) (Additional reporting by Nick Zieminski, Sinead Carew and ErnestScheyder in New York, Ben Berkowitz in Boston, Deepa Seetharaman inDetroit and Andrea Shalal-Esa in Washington; Editing by PatriciaKranz and Dan Grebler). We are high quality suppliers, our products such as China Single Phase Meter Test Bench , Electric Meter Test Equipment for oversee buyer. To know more, please visits Three Phase Meter Test Bench.
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