Businesses Improve Outlook, Paychecks, Hiring Plans

American businesses foresee stable economic growth, along with increased hiring.


American businesses are feeling more optimistic, and workers might finally be seeing direct evidence of it.

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In the latest quarterly survey from the National Association of Business Economics, the share of businesses that believe the economy will grow at a rate of 3.1 percent or faster from the fourth quarter of 2011 through the fourth quarter of this year has tripled since January's survey, from 5 to 15 percent. In addition, 63 percent believe that the economy will grow by 2.1 to 3 percent over that same period, a slight uptick since the last survey. Businesses surveyed also reported significant improvements in sales and profits.

"As we've been hearing all week or the last two weeks, many corporations are reporting higher first quarter earnings than (Wall Street's) estimate," says Ken Simonson, chief economist for the Association of General Contractors of America and the vice president of NABE. "That may be causing them to mark up their GDP forecasts as well."

The evidence of the economy's slow but sure improvement appears to be seeping into the labor market. The survey indicates flat hiring in the first quarter, with 28 percent of respondents reporting rising employment, virtually unchanged from January. However, the employment outlook is markedly improved. Fully 39 percent of panelists foresee an increase in employment over the next six months, up from January's 27 percent.

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And those workers who are hired, or who are already on the job, are already seeing bumps in pay. Some 44 percent of panelists say that wages and salaries are rising, well up from 26 percent in January and 19 percent in October.

That kind of improvement in pay may indicate a shift in mindset, with workers feeling more comfortable expecting higher compensation and employers finally not only able but willing to dole out additional pay.

"Perhaps this is the first sign that companies are now expecting to get deeper into corporate pockets to attract the sort of workers they want," says Simonson.

That's a very encouraging sign, as the recovery has thus far been unkind to workers' paychecks.

"This recovery is quite different in that it had such an immense jump in layoffs and long-term layoffs that I think wage expectations have been beaten down pretty far," says Simonson. "So at least through this year it's been relatively easy to attract workers without offering big wage increases."

Still, businesses are not going all-out on spending. Only 29 percent reported rising capital spending, down from 42 percent in January.

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However, American businesses still feel largely immune to the European debt crisis which continues to rankle markets. Over 70 percent of respondents say that the European debt crisis has had no effect on their sales, and 77 percent foresee no such impact over the next six months.

Twitter: @titonka