Private Companies Too Nervous to Hire

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Private companies are too nervous about the future to increase their hiring, according to a new survey of accountants, bankers and other financial professionals who work closely with these firms by financial information company Sageworks Inc.

[IMGCAP(1)]Approximately 32 percent of the 451 financial professionals polled by Sageworks between April 13 and May 1 indicated their clients aren’t hiring because they are concerned about the economy in general. Another 22 percent of the survey respondents said private companies have become more risk averse because of lingering anxiety over the last recession.

More than half of the survey respondents blamed economic concerns or risk aversion tied to lingering anxiety. Nearly one in four of the financial pros surveyed, or 23 percent, said their clients’ improved efficiency has reduced the need to hire additional people.

Fourteen percent of the survey respondents, or roughly one out of seven, blamed the government for being a deterrent to growth, while 2 percent indicated that private companies believe the government isn’t being active or effective enough in helping them create jobs.

While the reasons behind the sluggish hiring trend in the U.S. are probably varied, the survey shows that business owners are still worried about the future.

“The whole idea of job creation is really about how business owners feel about their sales numbers,” said Sageworks CEO Brian Hamilton in a statement. “They’re asking, ‘How are my sales? How are my profits right now? And about 12 months from now or 24 months from now, how do I think I’ll be doing? Will my customers be happy? Are people going to be optimistic?’ Right now, there’s this general anxiety as to what’s going to happen in the future.”

“The fear now is that we may be running out of runway before the onset of another recession,” Hamilton added. “If you look over a long period of time, the average expansionary cycle is approximately four years, and the average recessionary period is one year.  Historically, it has taken approximately 12 to 20 months for unemployment to fall in an expansion to roughly pre-recession levels.  Right now, we are into the 34th month of the recovery, and yet unemployment remains too high.  If we don’t get employment up, we may be bumping into the next recession, during which time we cannot expect job growth.”

Earlier data from Sageworks indicated that privately held companies, which drive more than half of U.S. gross domestic product and create more than 65 percent of new jobs, have seen their sales grow by an average 8.3 percent in the 12-month period ending in April. Net profit margins are approximately 6 to 7 percent, compared with around 4 percent on average in 2009, according to Sageworks data.


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