Executives see downturn on the horizon

More than half of CFOs surveyed expect recession by 2020

DURHAM, N.C. — An economic downturn is looking more likely in 2019, according to a global survey of chief financial officers.

Nearly half of the U.S. executives surveyed in the Duke University Fuqua School of Business quarterly survey now believe that the U.S. will enter a recession by the end of next year.

Even more — 82 percent — think that a recession will happen by the end of 2020.

The negative sentiment comes off the back of nearly a decade of growth in the U.S. and generational lows in unemployment. But there have been some warning signs, said John Graham, a finance professor at the Fuqua School of Business, in a phone interview.

“There have certainly been (negative) things happening,” said Graham, noting the trade war between the U.S. and China as well as slowdowns in European economies, “but somehow the U.S. economy has been going like a steam engine.”

The survey was of 500 CFOs, including 226 in the United States.

One of the biggest concerns beyond economic uncertainty, according to surveyed CFOs, is how difficult it has become to hire new employees with the U.S. unemployment rate at 3.7 percent — its lowest level since 1969.

“Right now it has become hard to hire people with skills and you can’t keep expanding without the employees there,” Graham said. “We have reached full employment, and that is great thing for many people that didn’t have a job two years ago and now have jobs.”

But, when you reach the limits of full employment it puts a ceiling on growth, Graham said.

CFOs aren’t predicting layoffs, however, just hiring at a slower pace, he added, noting that if there is a recession it shouldn’t be a severe one.

Mark Vitner, a senior economist at Wells Fargo, said the chances of a recession have crept up, though he is still predicting growth next year between 2 percent and 2.5 percent — and if a trade resolution is made with China, for example, the negative narrative could change.