Global employment freeze looms as economic confidence plummets among the world’s hirers

The latest Global Economic Conditions Survey from ACCA and IMA, released last month, found that more than half of firms are either cutting or freezing employment, while only 14% are increasing investment in staff. Responding to the findings, Faye Chua, ACCA head of business focus said:

“Take North America out of the equation and the economic picture painted by this survey isn’t a pretty one. Emerging markets are besieged. Revenues for commodities firms have collapsed since mid-2014. And business confidence in China has fallen to its lowest level since our records began.

“Almost half of businesses reported a drop in income in Q1. As a result, every region except North America saw a jump in the number of businesses cutting capital expenditure. With emerging economies continuing to struggle with low commodity prices and many businesses on a spending lock down, the outlook for the global economy is becoming increasingly gloomy.”

According to Faye Chua, it is the emerging markets suffering most from bottom lines being squeezed:

“Wages are rising rapidly in many parts of the world and businesses are finding it harder to cope as revenues come under increasing pressure. The sharp drop against the dollar experienced by many currencies will also have pushed up costs, making imports more expensive and raising the value of dollar-denominated debts. All this means that firms in emerging-market economies are very pessimistic about their prospects.”

What’s more, Faye Chua warns that global policymakers could be running low on ammunition in the fight to turn things around:

“In developed economies, governments have worked hard to stabilise their debt-to-GDP ratios. Will they want to reverse that good work and risk the wrath of bond investors? It’s highly unlikely. Instead, we’ll see the heavy lifting left to central banks in the main. The problem with this approach is there are serious doubts around their ability – or indeed inclination – to provide more support.”

For Faye Chua, pulling the global economy out of the doldrums is not going to be achieved in the short term:

“Once income begins to drop and businesses stop hiring, getting them to a point where they are confident enough to begin doing so again is difficult -  but vital.

“The one positive is business confidence in non-OECD economies did pick up slightly in Q1, led by central and eastern Europe - and Russia in particular. Let’s hope that is a sign of more positive news to come.”