CEOs Say They Expect a U.S. Recession, but Most Think It Will Be Short

“Just about every region with the exception of China believes there’s going to be some kind of economic downturn,” said

Dana Peterson,

the Conference Board’s chief economist. “Ninety-eight percent of CEOs in the U.S. think there is going to be a recession—but it’s going to be short and shallow.”

As a result, executives said their response to a downturn would likely diverge from past playbooks, when hiring freezes and layoffs tended to be among companies’ first responses, according to the survey, which included 670 CEOs.

U.S. CEOs said they were more likely to focus on innovation, emphasize higher-growth business lines, protect margins with pricing strategies, invest in marketing and cut administrative and discretionary spending. European CEOs said they favored delaying capital investment over job cuts.

“Why would you give people the incentive to pick up the phone and contact a recruiter?” said

Rebecca Ray,

who heads the Conference Board’s workforce practice. “I think that’s going to be a decision of last resort.”

That may reflect expectations that any downturn will be mild and the battle scars from the persistently tight labor market in many industries, Ms. Peterson added. “If the bottom’s really falling out, businesses probably will think about more dramatic measures,” she said.

The labor market remains historically tight despite the cooling economy. The unemployment rate stood at 3.5% in December, and many employers say they continue to face challenges filling some positions. Job cuts so far have largely focused on white-collar employees, particularly in the tech sector, as demand for goods and services remains too strong for many companies to consider laying off front-line workers.  

The top external concerns for U.S. survey respondents were recession, inflation and labor shortages. A year ago, the top three were labor shortages, inflation and supply-chain disruptions, with recession ranking sixth, the Conference Board found at the time. 

A separate quarterly survey of more than 1,300 executives by recruiting firm Russell Reynolds Associates also found that concern about economic growth rose sharply at the end of last year, with two-thirds of respondents ranking it among their five biggest external concerns, roughly matching concern over the availability of key talent and skills. 

Worries about borrowing costs surged over the past year in the U.S., as the Federal Reserve has implemented a series of sharp interest-rate increases to tame inflation. The cost of borrowing was the fourth-biggest worry among American CEOs and the 10th-biggest worry globally, the Conference Board said. A year ago, borrowing costs ranked 25th in the U.S. and 22nd globally.

By contrast, supply-chain concerns have eased, with a third of CEOs globally and 44% in the U.S. saying they don’t plan to alter supply chains in the next three to five years. Concerns about Covid were also generally waning outside China and Japan.

Russia’s invasion of Ukraine ranked as a top worry primarily for European CEOs, who put the war among their top five concerns.

Executives outside the U.S. and Europe are more cautious about the pace of economic recovery. About a third of Chinese- and Japanese-company CEOs and 29% in Latin America said they expect growth to resume after mid-2024, according to the survey.

Write to Theo Francis at [email protected]

“Just about every region with the exception of China believes there’s going to be some kind of economic downturn,” said

Dana Peterson,

the Conference Board’s chief economist. “Ninety-eight percent of CEOs in the U.S. think there is going to be a recession—but it’s going to be short and shallow.”

As a result, executives said their response to a downturn would likely diverge from past playbooks, when hiring freezes and layoffs tended to be among companies’ first responses, according to the survey, which included 670 CEOs.

U.S. CEOs said they were more likely to focus on innovation, emphasize higher-growth business lines, protect margins with pricing strategies, invest in marketing and cut administrative and discretionary spending. European CEOs said they favored delaying capital investment over job cuts.

“Why would you give people the incentive to pick up the phone and contact a recruiter?” said

Rebecca Ray,

who heads the Conference Board’s workforce practice. “I think that’s going to be a decision of last resort.”

That may reflect expectations that any downturn will be mild and the battle scars from the persistently tight labor market in many industries, Ms. Peterson added. “If the bottom’s really falling out, businesses probably will think about more dramatic measures,” she said.

The labor market remains historically tight despite the cooling economy. The unemployment rate stood at 3.5% in December, and many employers say they continue to face challenges filling some positions. Job cuts so far have largely focused on white-collar employees, particularly in the tech sector, as demand for goods and services remains too strong for many companies to consider laying off front-line workers.  

The top external concerns for U.S. survey respondents were recession, inflation and labor shortages. A year ago, the top three were labor shortages, inflation and supply-chain disruptions, with recession ranking sixth, the Conference Board found at the time. 

A separate quarterly survey of more than 1,300 executives by recruiting firm Russell Reynolds Associates also found that concern about economic growth rose sharply at the end of last year, with two-thirds of respondents ranking it among their five biggest external concerns, roughly matching concern over the availability of key talent and skills. 

Worries about borrowing costs surged over the past year in the U.S., as the Federal Reserve has implemented a series of sharp interest-rate increases to tame inflation. The cost of borrowing was the fourth-biggest worry among American CEOs and the 10th-biggest worry globally, the Conference Board said. A year ago, borrowing costs ranked 25th in the U.S. and 22nd globally.

By contrast, supply-chain concerns have eased, with a third of CEOs globally and 44% in the U.S. saying they don’t plan to alter supply chains in the next three to five years. Concerns about Covid were also generally waning outside China and Japan.

Russia’s invasion of Ukraine ranked as a top worry primarily for European CEOs, who put the war among their top five concerns.

Executives outside the U.S. and Europe are more cautious about the pace of economic recovery. About a third of Chinese- and Japanese-company CEOs and 29% in Latin America said they expect growth to resume after mid-2024, according to the survey.

Write to Theo Francis at [email protected]