investments
During the fourth quarter of 2008, economists Murillo Campello, John Graham, and Campbell Harvey conducted a survey of CFOs to understand their reactions to the financial crisis. What they found is presented in their new working paper and summarized in this digest article. One highlight:
Constrained firms, on average, said they plan to cut employment by 11 percent, technology spending by 22 percent, capital investment by 9 percent, marketing by 33 percent, and dividends by 14 percent in 2009. Also, 13 percent of such firms tapped their lines of credit in order to have cash to meet expected needs, and another 17 percent did the same in case their banks shut off their credit. Few unconstrained firms report plans for significant cuts or concerns about the availability of credit during the period.
The news is not good. A double dose, in fact. First up, weekly unemployment claims:
In the week ending Sept. 20, the advance figure for seasonally adjusted initial claims was 493,000, an increase of 32,000 from the previous week's revised figure of 461,000. It is estimated that the effects of Hurricane Gustav in Louisiana and the effects of Hurricane Ike in Texas added approximately 50,000 claims to the total. The 4-week moving average was 462,500, an increase of 16,000 from the previous week's revised average of 446,500.
Even the 443,000 without the impacts of the hurricanes is a sign of a very weak labor market. As I've noted before, over the past 20 years, claims haven't gotten this high without going higher.
