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Survey: Business Recovery Gains Momentum, Jobs Ahead

04/27/2010
Business recovery is continuing, with industry demand increasing for a third consecutive quarter and all for major industry sectors experiencing strong demand growth, according to the National Association for Business Economics' (NABE) April 2010 Industry Survey.

After more than two years of job losses, job creation increased in the first quarter of 2010, suggesting a better outlook for hiring over the next six months, according to the survey.

The report polled 68 NABE members between March 25, 2010, and April 10, 2010, on business conditions in their firm or industry and reflects first-quarter 2010 results and the near-term outlook.

"The survey confirms that the U.S. recovery from the Great Recession continues, with business conditions improving," said William Strauss, Federal Reserve Bank of Chicago.

Industry demand moved higher compared to results in the January 2010 report, pointing to stronger growth in 2010.

While input costs have been increasing, prices have also been moving higher, allowing profits to continue to rise, states a press statement.

Little of the improvement to date in job growth can be attributed to the stimulus bill enacted in February 2009, says NABE, as capital spending remained steady. Tight credit conditions continued to negatively impact business conditions, the study noted.

Other survey highlights include:

More than half of those polled said some portion of their firms' sales came from foreign-based operations, with 14% indicating that more than half of their sales were from foreign sources.

Expectations for economic growth in 2010 have improved significantly. All respondents indicated business decisions are being made based on expectations for positive economic growth, and 24 percent believe real GDP will expand by more than 3%, and 70% of respondents believe the economy will expand by more than 2.0% in 2010.

The percentage of firms increasing payrolls rose to 22% from 13% in the January survey. The percentage of firms cutting jobs moved lower-from 28% in January to 13% in April. The share of respondents expecting their firms to add employees over the coming six months rose to 37%, up from 29% in the previous survey.

Materials costs continue to rise. The percentage of respondents reporting rising prices outpaced that of respondents reporting price declines. Labor cost pressures also continued to increase, with respondents reporting the highest NRI in more than two years.

Credit conditions continue to hamper firms. Despite improvements throughout the economy, a large share of respondents continue to report that credit conditions had a negative impact on their businesses during the first quarter of 2010.

The vast majority (73%) of respondents reported the fiscal stimulus enacted in February 2009 has had no impact on employment to date. While 68% also believe a jobs bill, such as the one recently enacted into law, will have no impact on payrolls, 30% do believe it will boost payrolls moderately.

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