The U.S. economy is not slipping back into recession but will face a long, slow recovery as political gridlock in Washington and Europe make businesses wary of investing, according to General Electric Co's Jeff Immelt and other top executives.
Recovery is underway, but it's a long, slow recovery. Slower than we'd like, the head of GE
While conditions are making executives nervous, the situation does not seem nearly as dire as it did during the credit crunch early in the last recession.
This is a lot different than 2008, guys, said Immelt, CEO of the largest U.S. conglomerate. There's liquidity, there's pockets of growth and I think people have confidence that they might be able to find the right pockets of growth.
Other top voices from corporate America offered a similar assessment on Thursday, including FedEx Corp
Data released on Thursday is backing them up: Activity in manufacturing, business spending and motor vehicle sales suggested that the economy, which expanded at a 1.3 percent annual rate in the second quarter, could avoid an outright decline in output.
We don't see a contraction; we don't see a recession, said FedEx's Smith, who founded the world's No. 2 package delivery company. It's steady as you go, slow growth.
ExxonMobil's Rex Tillerson 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.
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.
POLITICAL UNCERTAINTY HURTS INVESTMENT
Immelt and Smith said political logjams in Washington and Brussels have made businesses more reluctant to invest and hire -- stubbornly high unemployment is the biggest roadblock to the United States' recovery from the 2007-2009 recession.
There is just a lot of volatility because 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 and the European Central Bank on Thursday said it sees intensified threats to the euro zone economy.
The logjams are not limited to Europe. Immelt cited this summer's standoff in Washington over whether to raise the nation's 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.
(Reporting by Scott Malone in Columbus, Ohio; additional reporting by Stella Dawson and Lucia Mutikani in Washington; Editing by Matthew Lewis and Steve Orlofsky)