At our Yale CEO Caucus last week, we surveyed approximately 60 top CEOs in attendance on a broad range of economic issues. While our anonymous straw poll was informal and unscientific, the results suggest that CEOs are increasingly and broadly optimistic about the economy—in fact, much more bullish than just about any other group in the nation.
The CEOs we surveyed are surprised by the strength of their views, as 81% of respondents say they have been surprised by how well the economy has held up so far. Now, fully 84% of respondents believe the economy is headed for a soft landing, while only 10% expect a significant recession, and only 6% expect stagflation.
The optimism we heard from these CEOs stands in contrast to the negative predictions of certain leading business voices, such as one prominent banker’s prediction two years ago of a Category 4 “economic hurricane,” which never happened.
Similarly, negative nationwide polling results from respected outfits such as Mark Penn’s Harvard Harris Poll and Morning Consult suggest voters may be broadly pessimistic about the economy; 74% of CEO respondents believe the economy is performing far better than these polling results convey.
This optimism is backed up by headline economic statistics which remain strong, across economic growth, falling inflation, and low unemployment, with several CEOs pointing out how economic data suggests a soft landing is playing out in real time already. Real U.S. GDP growth rebounded to a strong 3.0% in the second quarter, surpassing consensus estimates, with economists expecting the U.S. economy to grow by ~2.7% across the entire year. The World Bank says the “impressive” strength of the U.S. economy drove 80% of its improved global growth outlook this year, declaring that “the U.S. economy has shown particularly impressive resilience….growth has remained buoyant in the teeth of the fiercest monetary policy tightening in four decades.”
As several CEOs noted, those growth estimates have risen alongside falling inflation, with the most recent August CPI inflation report coming in at a three-year low of 2.5%, well below consensus estimates and the third straight month of sub-3% CPI readings. Prices have come down without driving up unemployment, which remains near lows last seen in the 1960s, while wage growth now outpaces inflation, with real incomes growing at a steady rate of 5.1%. In dollar terms, income growth has outpaced price growth by $3,776 since 2021. Once again, this stands in contrast to the prognostications of some cynics. One leading economist had prominently insisted that we needed punishingly high interest rates to cause 10% unemployment for one year, or 6% unemployment for three years, to bring down inflation. It turns out, that was quite wrong.
Financial markets similarly back up the optimism shown by CEOs, with all major U.S. stock market indices near all-time highs—having already established well over 40 new record highs this year alone—driven by resilient corporate earnings. Similarly, consumer spending keeps coming in stronger than expected and is forecasted to rise 2.4% in 2024, more than last year.
While the Fed did cut rates this last week, the CEOs were unanimous in their view that interest rates are too high. The Fed’s decision to lower rates was not a triumph of leadership, as inflation fell regardless of the interest rates not triggering the desired rise in unemployment Fed Chair Jay Powell thought was necessary two years ago. Not a single respondent thought that the Fed should hold rates where they are or hike rates. (While CEOs clearly appreciate the importance of rates and the Fed, 84% believe the business media is too focused on Fed rate speculation each day, week after week to the exclusion of other substantive genuine business issues.)
At a time when how the economy is doing has a central debate of the 2024 election, it is clear that our nation’s top CEOs remain broadly confident in America’s economic dynamism and resilience. In short, the CEOs are channeling the wisdom of baseball philosopher Yogi Berra: “The future ain’t what it used to be!”
“The Yale School of Management is the graduate business school of Yale University, a private research university in New Haven, Connecticut.”
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