By KATE LINEBAUGH
Honeywell International CEO David Cote says job growth won't
improve much until US economic growth tops 3%, in a bleak
outlook for employment as the economy continues to bump
The conglomerate, which makes avionics, automotive
turbochargers and thermostats, among other products, has only
been hiring two to three employees for every four or five who
leave. Mr. Cote plans to slow his hiring further amid
persistent uncertainty over the US economy.
"We've become more concerned recently," Mr. Cot
e said in an interview. "If we want employment to grow, we have
to have GDP growing more like 3%, not 2% or less."
Honeywell's outlook for the US economy this year is more
pessimistic than that of some other forecasters. The company
expects the economy to grow just 1.9%, down from the 2.2% for
2012 reported by the Commerce Department. Economists are
forecasting 2.4% growth this year, according to a recent
Wall Street Journal survey, amid signs of improvement
in the housing market.
The unemployment rate ticked slightly higher in January to
7.9% from 7.8% in December, according to the Labor Department,
but it was lower than the 8.3% rate in January 2012. The
economy added 1.9 million private-sector jobs last year.
"We are generating jobs. We just need to generate more
jobs," said Joseph LaVorgna, chief US economist at Deutsche
Bank, which projects the US economy will grow
2.3% this year. "The trend is going in the right direction. It
is just frustratingly slow."
Like other major US companies, Honeywell has been increasing
profits faster than sales. In the fourth quarter of 2012, sales
for the biggest US companies grew 3.7% from a year earlier,
while profits rose 6.1% to their highest level ever, according
to data from Thomson Reuters.
To pull that off, companies did things like cutting costs,
reducing workers or charging higher prices. Companies are
expected to keep running lean until there are signs that a more
robust recovery is under way that could further boost
Honeywell has improved its profit margin each year since
2009 and expects to raise it another notch this year. To do
that, the company plans to derive more sales from international
markets where growth rates are higher, such as the Middle East
and China, offer more new products across its portfolio and cut
Since 2009, Honeywell, which gets 59% of its sales from
business in the US, has added 10,000 jobs globally, boosting
its employee count to 132,000, while eliminating 2,000
positions in the US. Last year, Honeywell trimmed its US
workforce by 1,000 jobs to 52,000 employees.
"We have 1,000 less people in finance than we did when I
arrived in June of 2003," Honeywell chief financial officer
David Anderson said. The company has also reduced the ranks of
its top executives slightly, to 580 from 600.
Honeywell has curtailed spending plans, though it will seek
to increase capital spending this year by a third to $1.2
billion. The funds will be used mainly to build two new facilities in the US.
Meanwhile, the effect of the cuts from Washington as part of
the so-called sequester will be minimal for Honeywell, which
relied on sales to the US government for about 11% of its
revenue last year.
"We anticipated and planned for some level and some period
of sequestration," Mr. Anderson said. The company expects a
slight decline in its defense business in 2013.
Dow Jones Newswires