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March 30, 2022

Optimism Dips Amid Weaker Economic Outlook and Ongoing Labor Pressures

Brent MeyerJohn Graham, Emil Mihaylov, and Sonya Ravindranath Waddell

Since we last heard from The CFO Survey panelists back in December 2021, uncertainty over the Russian invasion of Ukraine has contributed to even larger swings in energy prices and commodity markets. The invasion further exacerbated the challenges firms have faced in a world where supply chains were already clogged, lack of available labor was already restraining firm output, and the high inflation environment was leading monetary policymakers to remove accommodation.

Perhaps it is not surprising, then, that The CFO Survey revealed firms’ dampened optimism about the domestic economy and lower projections for real GDP growth and equity market performance. At the same time, hiring difficulties are constraining company operations and/or dampening revenue growth for more than half of our panelists. In response to hiring difficulties, the majority of firms reported increasing starting wages and salaries and/or pushing employees to work longer hours.

Whither the Economy?

CFOs’ optimism for the overall U.S. economy fell in our first quarter survey (fielded from March 7-18). Average optimism for the economy dropped from 60.3 (on a scale of 0-100) in the fourth quarter of 2021 to 54.8 in the first quarter of 2022. (See the table below.) Interestingly, CFO optimism about their own firm’s performance remained relatively steady; the difference between respondents’ optimism about the economy and own firm performance widened notably from the last survey.

CFO Optimism, by Response Quarter
Q1 2022
Q4 2021
Mean (and median) optimism about own company from 0 to 10069.6
Mean (and median) optimism about the U.S. economy from 0 to 10054.8
Note: Mean optimism values are unweighted. Results from the Q4 2021 survey (November 8–19, 2021) are shown for comparison. Please see The CFO Survey Methodology for further information.
Source: Duke University, FRB Richmond and FRB Atlanta, The CFO Survey – Q1 2022 (March 7–18, 2022)

Digging deeper into these results reveals that optimism deteriorated largely among financial executives and business decision-makers at smaller firms (those with fewer than 500 employees). Average small firm optimism regarding the overall economy dipped from 60.6 to 53.9 in the first quarter. Focusing on the median respondent, small firm optimism fell from 65 in the fourth quarter of 2021 to just 55 in the current survey.

CFO Optimism, by Response QuarterQ1 2022Q4 2021
Firm SizeLarge Firms
Small Firms
Large Firms
Small Firms
Mean (and median) optimism about own company from 0 to 10071.4
Mean (and median) optimism about the U.S. economy from 0 to 10058.8
Note: Mean optimism values are unweighted. Large firms are firms with 500 or more employees. Results from the Q4 2021 survey (November 8–19, 2021) are shown for comparison. Please see The CFO Survey Methodology for further information.
Source: Duke University, FRB Richmond and FRB Atlanta, The CFO Survey – Q1 2022 (March 7–18, 2022)

In case readers think that the optimism decline was the result of changes in the sample, we also examined just those panelists who responded in both quarters. Among those “repeat responders,” optimism fell, on average, from 61.1 to 55.5. Nearly 70 percent of repeat respondents downgraded their optimism about the economy while just one in seven repeat respondents upgraded their outlook.

Lowered Expectations

Consistent with the decline in optimism about the economy, there was a clear downshift in CFO views over the likely path of real GDP growth over the next four quarters. Weighting the responses by firm activity (i.e., revenue), CFOs anticipate GDP growth over the year ahead to increase by 2.5 percent on average, lower than the 3.1 percent growth they anticipated in the fourth quarter.

The chart below shows the weighted average distribution of firms’ responses. A quick note on the setup for this question: This question elicits firms’ subjective expectations for real GDP growth by asking respondents to assign probabilities to each of the GDP growth bins in the figure. The figure clearly shows the downshift in mass toward the lower end of the distribution as firms downgraded their expectations for growth.

What is striking about this figure is the increased likelihood of a decline in real GDP growth. In fact, the total probability that respondents assigned to negative GDP growth doubled from 6.1 percent in the fourth quarter of 2021 to 12.3 percent this quarter. This is the highest level of negative growth probability since the fourth quarter of 2020.

Alongside a downshift in CFO views about U.S. economic growth, financial executives downgraded their expectations for equity market returns as well. (See the table below.) Firms, on average, see 3.6 percent as the most likely equity market appreciation over the next 12 months, compared to 6.2 percent, on average, one quarter ago. CFOs also see bourgeoning downside risks, with their worst case scenario well below the fourth quarter, at -6 percent, on average. On a brighter note, their longer-run outlook for equities remained more or less intact.

Expectations for Stock Market Performance, by Response QuarterQ1 2022Q4 2021
Mean (and Median) Expected Annual S&P 500 Returns Over Next 12 Months and Next 10 Years12 Mos
10 Yrs
12 Mos
10 Yrs
Worst Case (a 1-in-10 chance the actual return will be less than):-6.2%
Most Likely Case3.6%
Best Case (a 1-in-10 chance the actual return will be greater than):9.5%
Note: The table shows responses from firms that indicated they closely follow the stock market. Results from the Q4 2021 survey (November 8–19, 2021) are shown for comparison. Responses are unweighted and winsorized at 2.5% and 97.5% to remove the potential influence of extreme values. Please see The CFO Survey Methodology for further information.
Source: Duke University, FRB Richmond and FRB Atlanta, The CFO Survey – Q1 2022 (March 7–18, 2022)

Another Straw on the Camel’s Back

A quick glance at CFOs’ open-text responses to their most pressing concerns highlights the most salient issues weighing on their minds and perhaps explains some of the deterioration in overall optimism. (See chart below.) As a share of unique mentions, CFOs ranked “cost pressures/inflation” as their top concern this quarter, supplanting “labor quality/availability” for the first time since the second quarter of 2021. Similar to last quarter, “supply chain concerns” continue to rank near the top of the list. Perhaps unsurprisingly, “geopolitical risks” — presumably tied to the invasion of Ukraine — rose to become a top-of-mind concern for financial executives. Interestingly, worries over “monetary policy” and the “financial health of customers” made the top 10 list, suggesting that demand conditions are beginning to trouble some CFOs.

In addition to high inflation, clogged supply chains, the invasion of Ukraine, and uncertainty around growth in demand, companies continue to grapple with hiring difficulties that appear to restrain their ability to meet existing demand.

As the chart below highlights, more than three-quarters of our panel are experiencing hiring difficulties, which is higher than when we asked this same quesiton in the third quarter of last year. This finding aligns with the most recent Job Openings and Labor Turnover Survey from the Bureau of Labor Statistics, which indicated that there are roughly 4.8 million more openings than hires at the moment, the largest imbalance on record between demand for and supply of workers. Among our respondents, almost three-quarters of those experiencing hiring difficulties (or roughly half of our panel) say that hiring challenges are negatively impacting their revenue. For a large swath of firms, these hiring difficulties are also affecting their ability to operate at full capacity.

We further asked CFOs how their firms were responding to these difficulties. The figure below shows how panelists with hiring difficulties responded, given a list of options.

Perhaps unsurprisingly, firms are overwhelmingly responding to hiring challenges by increasing starting wages and salary offerings. When asked how much they are increasing wage/salary offerings for hard-to-fill positions, the variance was high, but roughly 80 percent of firms indicated they are raising starting offers by more than 5 percent, with an overall average starting salary increase of 10.4 percent.

In addition, many firms are coping with hiring difficulties in other ways, such as having existing employees work longer hours (nearly two-thirds of these firms), hiring less experienced workers (about 50 percent), and implementing labor-saving automation (about 40 percent). While these responses may be short-term patches to the immediate hiring challenges, they engender a whole host of problems (and opportunities) that will be interesting to monitor.


In sum, CFOs have become less optimistic about the future prospects for the U.S. economy, a feeling manifested in lowered growth projections and lowered expectations for equity market returns over the year ahead. At the same time, firms are hampered by the supply side hiring difficulties that are restraining revenue growth. In response, firms continue to increase starting wages and implement a host of alternative measures to keep operations intact.


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