COLUMBUS, Ohio (Reuters) - Corporate America’s chiefs do not expect the nation to slip back into recession, but say political gridlock in the United States and Europe could make for a long, slow recovery.
Top chief executives including General Electric Co’s (GE.N) Jeff Immelt and ExxonMobil Corp’s (XOM.N) Rex Tillerson said on Thursday that the U.S. economy could remain sluggish but will likely avoid an outright double-dip downturn.
“Recovery is underway, but it’s a long, slow recovery. Slower than we’d like,” the head of GE (GE.N) told a group of about 500 executives from mid-sized U.S. companies.
While conditions are making executives nervous, the situation does not seem nearly as dire as it did during the credit crunch during the last recession.
“This is a lot different than 2008,” said Immelt, chief executive of the largest U.S. conglomerate. “There’s liquidity; there’s pockets of growth.”
The head of FedEx Corp (FDX.N), the world’s second-largest package delivery company also offered a cautious view.
“We don’t see a contraction; we don’t see a recession,” said FedEx founder Smith. “It’s steady as you go, slow growth.”
Tillerson, who heads the world’s largest publicly traded oil company, sounded a similar note.
“I am not as optimistic as I was six months ago. It will continue, I am afraid, to be a sluggish (U.S.) economy, and globally the economy will not perform as well as we expected,” Tillerson told the Washington Ideas Forum.
“We will have positive growth (but) it is not going to be as positive as we hoped.
Data released on Thursday backed up their guarded confidence, showing a pick-up in consumer spending and modest improvement in employment — critical given that stubbornly high joblessness has been the main roadblock to the nation’s economic recovery.
New unemployment claims rose slightly to 401,000 last week, near a level that is associated with modest improvement in the jobs market.
And major U.S. retailers including Kohl’s Corp (KSS.N) and Nordstrom Inc (JWN.N) reported stronger-than-expected sales in September, on average up 5.1 percent at stores open at least a year. A 4.6 percent gain had been expected.
Those reports and news that the European Central Bank was taking new measures to help the continent's banks weather the euro zone debt crisis boosted U.S. shares, with the broad Standard & Poor's 500 index .SPX up 1.1 percent, for a third straight day of gains.
But even with that rise, the index is down about 8 percent for the year, reflecting deep unease among over the direction of the U.S. and European economies.
Immelt and Smith spoke at an event where GE Capital and Ohio State University’s Fisher College of Business unveiled research on the “middle market” sector of U.S. business, companies with $10 million to $1 billion in annual revenue.
The study found that tier of business is an underappreciated jobs engine for the U.S. economy that accounts for about one-third of employment and continued to add workers through the recession, while big U.S. companies were shedding people.
Executives said political logjams in Washington and Brussels have made businesses more reluctant to invest and hire.
“The world has problems and classic institutions have not been able to solve these problems — that creates volatility,” Immelt said. “I’d like to think that a fully functioning integrated financial system in Europe could have stopped the Greece crisis quickly. That hasn’t taken place.”
Concerns that Greece could default on its debt have rattled European and U.S. banks over the past couple of weeks.
The logjams are not limited to Europe. Immelt cited this summer’s standoff in Washington over whether to raise the debt ceiling or allow the United States to slip into default.
“Congress just doing one bipartisan thing, however small, would be conducive to the market. It would be a positive to investors,” Immelt said.
Immelt, a lifelong Republican, currently serves as a top adviser to the Obama administration on jobs and the economy.
However, not all the blame lies with politicians, Smith said. He suggested that CEOs, who command considerable public attention in their own right, could do more to tamp down the partisan bickering that has flared in the United States.
In part, he said, CEOs can afford to be more candid in commenting on when they agree or disagree with policymakers than can officials who face election.
“If one person on the right said, ‘You know President Obama did a hell of a job on that bin Laden thing,’ the next time he ran for anything it would be on the TV and his opponent would say, ‘Obama supporter, I’m a better Republican,’” Smith said.
“Those of us in the business community who don’t need to run for anything probably need to be a bit more candid.”
Additional reporting by Stella Dawson and Lucia Mutikani in Washington; Editing by Matthew Lewis and Steve Orlofsky