Nearly one-third of SMBs cut back on hiring in late 2012 due to 'fiscal cliff' worries

Economic uncertainty top concern
By Gabriel Debenedetti
|hrreporter.com|Last Updated: 01/09/2013

NEW YORK (Reuters) — At least one in four small- and medium-sized United States businesses said they scaled back on investment and hiring in late 2012 due to worries about the fiscal cliff, according to a survey by Vistage.

Nearly one-third of chief executives polled said they had invested less because of concerns about automatic spending cuts and tax hikes that would have gone into effect from January without the last-minute deal that was struck in Washington.

Nearly 30 per cent said they had hired fewer people for the same reason, according to the survey of 1,601 small and medium-sized U.S. businesses.  

Lawmakers in Washington narrowly avoided the full impact of the cliff, with President Barack Obama signing a deal on Jan. 2 after months of wrangling. But tough decisions about spending cuts still need to be thrashed out.

One-fifth of executives in the Vistage survey said they were likely to reduce spending over the next year, the highest level since mid-2009 and up from 15 per cent in the previous survey at end of the third quarter.

Slightly more than one-third of respondents said economic uncertainty was the most significant business issue they face, and 11 per cent identified political uncertainty.

More than one-third said overall economic conditions in the U.S. had improved over the last year, compared with 47 per cent who said they were "about the same." More than 40 per cent expected the next 12 months to remain about the same, 26 per cent foresaw better conditions and 30 per cent feared they would be worse.

Vistage's overall CEO Confidence Index fell for the third straight quarter to 87 in the fourth quarter of 2012, down from 89 in the previous three months and 98.8 one year ago.

As the U.S. economy gradually recovers, the fiscal fight in Washington remains unfinished. Businesses will be watching negotiations over raising the federal government debt ceiling in the coming weeks, which will revisit spending and taxes.

Slightly more than one in 10 CEOs expect to shed employees. The rest were roughly split between those increasing or maintaining their staff levels, found the survey.

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