CEOs wary of hiring, but sweat over jobless rate

By Scott Malone

BOSTON (Reuters) - Corporate America's job engine is largely stalled, with chief executives waiting for a pickup in demand that would result from higher employment, yet wary of adding jobs in their own companies.

More than two years into a tepid recovery from a brutal recession, U.S. chief executives are unwilling to hire many new workers until demand picks up. But even they admit the demand they are counting on is directly tied to employment.

Data released on Friday showed that U.S. job growth was much weaker than expected in June, allowing the nation's unemployment rate to creep back up to a six-month high of 9.2 percent and shaking executives' confidence.

Continuing high unemployment has scared consumers off from making big purchases like cars -- U.S. auto sales have been weak for the past two months -- and left them looking for discounts on small-ticket items like clothing, helping chain stores rack up a better-than-expected June.

"Employment is not doing what it needs to do" to allow a rebound in demand for cars said Hyundai Motor America <005380.KS> Chief Executive John Krafcik.

"Jobs are still an issue, housing is still a big issue and I don't think that's talked about enough in the context of our industry. When people don't have home equity, it's often very difficult for them to pull that trigger and buy a new car," Krafcik told reporters at Hyundai's technical center outside Detroit.

CEOs have repeatedly expressed reluctance to add jobs. A June survey by the Business Roundtable found that just 51 percent planned to add staff in the United States over the next six months.

Executives attending this week's Allen & Co media conference in Sun Valley, Idaho, also expressed caution.

"Politicians need to make tough decisions," Malone told reporters.

President Barack Obama's Democratic party and the opposition Republicans who control the House of Representatives are locked in a months-long battle over how to cut $4 trillion from the nation's budget deficit over the next decade.


The budget battle is a concern for CEOs because it leaves them uncertain about the tax rates that both their companies and employees will pay, a top executive told Reuters.

"I am in favor of having the discussion because this basically helps to clear the skies, but hopefully after several weeks they should come to some conclusion ... We need a clear vision on the tax situation."

As long as demand remains spotty, CEOs see no reason to add jobs, said Keith Springer, president of Springer Financial Advisors in Sacramento, California.

"CEOs know that they don't need to hire more people," Springer said. "The President can talk all he wants about how corporate America needs to hire, but when you're profitable and you're able to sell all you can make and you don't see any increased demand, you basically have reached equilibrium."

Despite the weak jobs report, several executives at the Sun Valley media conference offered a mixed view of the economy.

Fixing things will "just take time," said Barry Diller, chairman of IAC/Interactivecorp <IACI.O>.

Tom Staggs, chairman of Walt Disney Co's <DIS.N> theme park arm, characterized recent events as a mixture of "good signs and bad signs."

Some simply seemed to have tired of the United States' lingering financial malaise, which has taken a heavier toll on the poor and middle class than on the occupants of the nation's corner offices.

Designer Diane von Furstenberg, who arrived at the media conference separately from her husband Diller, exclaimed "that's no fun!" when asked about the jobs numbers and kept walking.

(Reporting by Scott Malone in Boston, additional reporting by Ben Klayman in Detroit and Sarah McBride in Sun Valley, Idaho; Editing by Tim Dobbyn)