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Executive Optimism Up Slightly in Q1 2013

Private companies plan to hire but can't find the right talent.

The first quarter of 2013 experienced several major hurdles. The United States economy started off the new year in a continued strive toward full recovery. Fiscal cliff uncertainty and shaky markets abroad didn't provide a very comforting environment, and analysts are still measuring the full impact of the expiration of the payroll tax cut. Throw sequestration - which kicked off and at the end of February - into the mix, and we've got quite a complex situation for U.S. businesses. However, a recent survey suggests the troubling economic atmosphere may not have worried companies all that much. In fact, according to PricewaterhouseCoopers' "Private Company Trendsetter Barometer" report, during Q1 2013, private-company executives' optimism about the coming year increased 8 percentage points from the previous quarter.

Quarterly Increase, but Not a Major Improvement
​PwC's Q1 report surveyed 225 CEOs and CFOs from privately owned companies in both the product and service sectors.

Half of executives said they have a positive outlook for U.S. economy for the following 12 months, and only 11 percent said they're pessimistic, down 7 percentage points from Q4 2012. PwC notes optimism about the world economy was also up 12 percentage points from the previous quarter to 37 percent, which is the highest rate registered since Q2 2011.

While last quarter's figures are comforting, they aren't as good as they were in Q1 2012. During that period, U.S. economic optimism was 60 percent and pessimism was at only 8 percent. Even though more C-suite professionals expressed positivity for global markets in 2013, fewer registered negative outlooks in 2012.

Hiring is Up but Skills Shortage Remains an Issue
On the bright side, though, PwC stated Q1 2013 hiring intentions increased from 2.8 percent the previous quarter and 1.8 percent at the beginning of 2012 to 3.4 percent. In the most recent survey, a little more than half of executives said they plan to hire in the coming year. However, the talent gap is hitting companies across industries hard, as nearly three in 10 CEOs and CFOs surveyed said the lack of workers in the job market who have the skills necessary to fill positions is hindering organizational growth.

"Significant time out of the workforce has eroded skillsets for some workers, so it's understandable that private companies see a lack of qualified talent as a significant headwind," said Ken Esch, partner with PwC's Private Company Services division. "An increasing number of them are addressing this issue by retraining new employees to bring them up to speed."

Meanwhile, the result of the talent crisis, which has been building up for year, has affected workers even more significantly. According to research published in Harvard Magazine, the percentage of part-time involuntary employment among male workers has grown steadily over the past decade, with Latino and Black labor force members seeing the highest rates.

Investing Remains Conservative
In terms of forecasted revenue, companies expected a 6 percent growth rate in Q1 2013, down from 7 percent the previous quarter. Seventy-five percent of private company execs expect positive revenue increases, down 5 percentage points from the previous quarter. PwC explains international companies can be attributed for the drop, as they shared the lowest forecasts for growth.

"As companies continue to grow, post-recession, it can be difficult to maintain the same high growth rates because they are no longer benefiting from low comparables," said Esch.

The number of execs planning major investments and spending levels was essentially unchanged from the previous quarter. However, banking was up four percentage points during Q1 2013, with many of the 18 percent who said they increased financial activity reporting more bank loans.

Overall, private company C-suite professionals are looking for ways to invest in growth, but don't seem poised for major expansion initiatives.

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