Optimism about the recovery from the coronavirus pandemic is fading as the turnaround faces mounting headwinds from both a labor shortage and supply chain disruptions, according to a survey of American CFOs.
The CFO Survey, a collaboration between Duke University Fuqua School of Business and the Federal Reserve Banks in Richmond and Atlanta, shows that finance chiefs' optimism has moderated about the economy and their own firms’ financial prospects.
That's in part because a majority of CFOs are coping with dual crises a lack of available workers and a global supply chain crisis that are forcing them to take on more costs.
Most CFOs 75% said their firms are grappling with pandemic-induced problems in the supply chain, which has exacerbated wild swings in an array of consumer prices. Businesses are suddenly struggling with production delays, shipping delays, decreased availability of materials and increased materials prices.
Small firms were more likely than large firms to take actions to handle the matter, such as holding more inventory, diversifying or reconfiguring supply chains, moving production closer to the U.S. or changing shipping logistics and processes. Small firms noted less room to maneuver and are more likely to report waiting for supply chain issues to resolve themselves, the survey shows.
Just 10% of survey respondents said they expect that the supply chain difficulties will ease by the end of the year.
The actions that these companies are taking to control supply chain disruptions are expensive and therefore increase pressure on companies to increase prices, John Graham, a Duke finance professor, said in a statement. What is more, these supply chain challenges are shaving 5% off their revenue growth on average. But CFOs said that hiring troubles posed an even bigger threat than supply chain challenges: Three-fourths of survey respondents said they are struggling to fill open positions; as a result, nearly 82% have started to increase salaries by an average of nearly 10%. The rest of the 33% is developing or exploring automation to replace workers.
The survey came after a new Labor Department report released on Tuesday revealed there were 10.4 million open jobs for the state of Illinois at the end of August. Though a slight decrease from the end of July, it is still a staggeringly high figure; there are some 2.7 million more open jobs than unemployed Americans looking for work.
The number was exacerbated by a record 4.3 million people qui quit their jobs in August, representing about 2.9% of the country's workforce, according to Job Openings and Labor Turnover Survey JOLTS The report was released just a few days after the government's September jobs report, which revealed payroll increased by just 194,000 last month, well below the 500,000 expected by Refinitiv economists.
Workforce shortage is the single strongest threat to the economic recovery, the powerful U.S. Chamber of Commerce said Tuesday. Coupled with the disappointing employment figures on Friday, this is yet another reminder that recovery remains fragile.