The Economy

Private Companies See Bright Prospects, Wage Growth

For the first time in two years, more than half of private employers expect to add employees over the next year: PwC report.
Ken EschAugust 10, 2017
Private Companies See Bright Prospects, Wage Growth

CEOs and CFOs of privately held companies are growing more confident in the U.S. economy, feeding expectations of brighter prospects for their own businesses. As a result, hiring plans are up and importantly, so are expectations for future wage growth, according to a PricewaterhouseCoopers survey.

Ken Esch

Ken Esch

PwC’s second-quarter Trendsetter Barometer survey of 301 CEOs and CFOs found that a net 52% of the participants planned to add employees over the following 12 months (“net” in the sense that exclude “uncertain” responses from our percentages). The last time more than half of Trendsetter panelists forecast a workforce expansion was in the fourth quarter of 2015.

Panelists also expected future wage increases. Current employees were expected to get an average 2.78% increase in hourly wages over the next 12 months, compared with an average future expected increase of 2.07% over the last four quarters. The outlook for wages has been a good predictor of annual growth in U.S employment costs overall.

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At the moment, higher wage pressures are not a high-ranking concern for panelists. But if these trends from the second quarter hold, I expect we’re going to see privately held companies adjust expectations around wage costs and consider more investment in training to retain employees and attract new skills.

Keep in mind that these planned increases come as the U.S. economy nears full employment. Trendsetter panelists are feeling the pressure to fill positions. Demand is strong for professionals (such as finance or IT specialists) as well as for skilled and semi-skilled production workers.

But how much of this upswing in economic sentiment hinges on the ultimate success of Trump-administration reforms promising lower business tax rates and deregulation to boost U.S. growth?

At the moment, private-company leaders are not banking on a boost to revenue growth. We don’t see a significant difference in 12-month forecasts for company revenue growth between the third of survey participants who are “confident” that the Trump administration will be able to deliver on reforms (6.7% annual growth) and the third who are “not confident” (6.9%).

Yet these proposals — particularly those regarding tax, deregulation, and increased infrastructure spending — are important to panelists. Regardless of how they weigh prospects for enactment, most believe that these three proposals are moving ahead in directions that will benefit their business.

Confidence in the progress of these reforms over the next few months will be a pivotal factor in private-company hiring and investment planning. Panelists with greater confidence levels in the reform agenda are more likely planning to add employees and invest for growth in the next 12 months.

Ken Esch is a partner with PricewaterhouseCoopers. This article is republished here PwC’s permission.

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