CEOs of Largest Companies Turn Pessimistic

The Business Council, a group that includes leaders from 150 of the largest U.S. companies, released its October survey of members. Their attitudes have turned pessimistic since the organization's last poll in the spring.

Only one-third believe that their industry will improve in the next six months. That is down from two-thirds in the last poll. "After sharp and continuous improvements in business confidence during the past 18 months, the current survey indicates that members of The Business Council believe the acceleration phase of the recovery is over," the group said. About half said the U.S. economy would grow at a 2.1% to 3% pace for the balance of the year. The other half expect growth to be between 0.1% and 2%.

A full 80% of members said U.S. unemployment will be above 9.1% as late as next June.

The results raise several issues. The first is whether the CEOs of the companies believe that their earnings will be below expectations in the fourth quarter, which would seem to match their sentiment on the overall economy. Many of the firms could still cut costs to maintain margins, but that is hardly the making of a recovery.

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The second issue is whether their belief that unemployment will remain high is a reflection of their companies' own hiring plans. If so, America's largest firms will not be contributing to an improved employment picture.

And a third issue is to what extent large companies will pull back on capital spending, which would send a ripple through the portion of the economy that supplies expensive goods to large enterprises.

CEOs at these companies, many of which have hundreds of thousands of employees and tens of billions of dollars a year in annual sales, may be canaries in the coal mine. If so, the next two quarters will be tough.