Dive Brief:
- Nearly four out of 10 CFOs are scaling back hiring while automating tasks with new software, equipment and other technology, the Federal Reserve Banks of Richmond and Atlanta said in the description of a quarterly survey, noting that labor availability and quality is a leading concern among top finance executives.
- CFOs have also upgraded their forecasts for economic growth during the next 12 months to 2.2% from 1.7% during the Q4 survey, with optimism rising among firms of all sizes and industries, the Fed regional banks found in research conducted with Duke University’s Fuqua School of Business. The finance executives see just a 10% probability of recession, compared with 31% odds during the second half of 2023.
- “CFOs have improved their economic outlook amid stronger realized growth,” Atlanta Fed economist Brent Meyer said in a statement. “Firms still face many challenges, including a tight labor market and persistent pricing pressures, but there is less concern over a downturn in economic growth compared to previous quarters.”
Dive Insight:
Although quickening, economy-wide adoption of robots, artificial intelligence and other automation technology is unlikely to significantly alter total employment, or cause widespread job loss, in manufacturing, transportation, office administration and other tasks, according to the Bureau of Labor Statistics.
“There is little support in U.S. Bureau of Labor Statistics data or projections for the idea of a general acceleration of job loss or a structural break with trends pre-dating the AI revolution,” the bureau said in a study published in July 2022 before the release of AI chatbots such as Gemini, Copilot and ChatGPT.
Among CFOs that approved the automation of tasks during the past year, nearly 40% said that the technology prompted them to either slow the rate of new hiring, lay off employees or forgo filling open positions, according to the Fed regional banks’ survey.
The findings align with recent signs of a cooling in the labor market. Average hourly earnings last month increased only 0.1% compared with a 0.5% monthly gain in January.
Also, the unemployment rate rose to 3.9% and the Labor Department revised down the number of payroll gains in January to 229,000 from the earlier reported figure of 353,000. Employers last month added 275,000 jobs.
“The labor market remains relatively tight, but supply and demand conditions continue to come into better balance,” Fed Chair Jerome Powell said on March 20.
“The extreme imbalances that we saw in the early parts of the pandemic recovery have mostly been resolved,” he said during a press conference after policymakers decided to hold the federal funds rate steady for the fifth consecutive meeting.
CFOs ranked monetary policy as a leading concern, the Fed district banks found in the survey. The central bank, aiming to curb inflation, has held the federal funds rate since July at a range between 5.25% and 5.5%, the highest level in 23 years.
More than half of CFOs “expect their price growth in 2024 to remain above pre-COVID levels, suggesting that for many firms pricing pressures remain above what they consider normal,” according to the two Fed regional banks.
