Dive Brief:

• Fewer companies plan to hold cash and short-term investments this quarter than during the fourth quarter of 2021, the Association for Financial Professionals said, as labor shortages prompt stepped-up spending to attract and retain workers. 
• In a sign of greater business optimism, the net percentage of financial executives who plan to increase cash and short-term investments during the coming quarter fell to 2 percentage points in January from 18 points at the start of the fourth quarter, the AFP said. The net percentage is the difference between respondents who plan an increase minus those who do not.   
• “With Americans resigning from their jobs in droves, hiring managers are struggling to recruit employees,” AFP said in describing results of a survey early last month. “To fill new or vacant positions, and retain existing staff, business leaders may need to prioritize investing in their employees via increased compensation, benefits and career growth opportunities.”

Dive Insight:

CFOs face one of the worst labor shortages in decades as the omicron variant of COVID-19 slows the post-lockdown recovery in the job market and churns up company payrolls.

Job openings rose to 10.9 million in December from 10.8 million in November while the quits rate, or the number of workers who left their jobs as a percent of total employment, fell slightly to 2.9% from a record high of 3% over the same period, the Labor Department said Tuesday.

CFOs responded to the tough competition for workers by pushing up average hourly earnings 4.7% in December from 12 months before, the Labor Department said.

Employer demand for workers eased last month as the omicron variant spread, according to Nick Bunker, economic research director for North America at the Indeed Hiring Lab.

“Indeed data on job postings suggest demand took a hit last month,” Bunker said, adding that the decline may be temporary.

Companies are also decreasing cash and short-term investments to invest in their business, repay debt and to respond to cyclical or seasonal factors, Mariam Lamech, director of survey research at AFP, said in an email in response to questions.

“We see some signs of optimism,” she said, while noting that such factors as omicron, high inflation and political polarization pose “tremendous uncertainty” that is prompting some companies to hold on to cash reserves.

Fewer companies held cash last quarter than during the third quarter, according to AFP.

“Organizations that decreased cash holdings during the last quarter explained their actions were due to various reasons: investment to grow their business, deterioration in their business’s performance due to the pandemic, debt repayment and a few said share repurchase played a role in them having to deploy cash,” AFP said.

As part of its quarterly survey, AFP analyzed 95 responses from financial executives at Fortune 1000 companies in industries ranging from manufacturing and retail to energy and technology.