One on One with Terry McGraw, Chairman of The McGraw-Hill Companies
Thursday, September 11, 2008
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SUSIE GHARIB: The CEOs of some of America's biggest companies expect modest growth for the U.S. economy this year. That's according to a new survey today from the Business Roundtable. Joining us now to talk more about the survey's results, Terry McGraw, chairman of the Business Roundtable and chairman of The McGraw-Hill Companies (MHP). Terry, nice to see you again.
HAROLD "TERRY" MCGRAW, PRESIDENT, BUSINESS ROUNDTABLE: Good to see you, Susie.
GHARIB: Terry, the CEOs in your survey expect the U.S. economy to grow by 1.4 percent this year. That's up from 1.3 percent in your previous survey. That's still pretty weak. What you are hearing from your membership?
MCGRAW: Well, first of all, you know, we're still in a very event-driven environment. Some of the positives on the survey report for the -- and again, this looks out six months, and so, it's sort of a predictive index. And what we're seeing on the positive side is obviously, with the 160 companies that are the largest companies in America, and where they have their members' revenues are about 50 percent non-U.S., the rise in exports has helped them, the decline in energy prices has helped them. And also the stimulus package, Susie, coming forward, has taken a second- quarter GDP report from 1.9, and revised up to 3.3. So they're benefiting from those things. But we're also sitting in the middle of a continuing housing recession. Obviously, the capital markets and the credit crunch, also, you know, consumers. is still -- that's excluding autos, and that's a problem as well.
GHARIB: I understand that your survey was conducted in mid-August, which was before all of the turmoil about Lehman Brothers and about Fannie Mae (FNM) and Freddie Mac (FRE) and all of the issues about the housing market. To what extent are your CEOs concerned about the impact of those sectors on their businesses? What do they tell you?
MCGRAW: Extremely, extremely concerned. We seem to sort of bottom out and we start to see things starting to -- you know, start to recover a little bit, and then we get another event. And what these events after another event, it weighs on people. And it's a crisis of confidence and we have got to make sure that, you know, we get these contained, because people keep feeling that there's going to be another one and another one and that just erodes the confidence and allows people not to invest.
GHARIB: Right. Let's talk a little bit about the job market. The news today about jobless claims and the filings for jobless claims is still pretty bleak. Now according to your survey, CEOs say over the next six months, a third of them plan to increase hiring, a third say they're going to cut jobs, and a third say that they're -- you know, no change. So what's the take-away here from the Business Roundtable about the outlook for the labor market?
MCGRAW: Well, actually, in terms of that survey compared the second- quarter survey, there has been very little change on that, and that has -- that has stayed fairly steady. Obviously, unemployment went up to 6.1 percent and our guess is that it will probably go up to somewhere around 6.5 percent before it will start to decline and that will take us well into next year.
GHARIB: You have mentioned something about most of the companies have -- do a lot of big exports. What does the stronger dollar mean for sales and profits for the companies in your group?
MCGRAW: Well, actually, you know, the stronger dollar right now is helping a little bit in terms of a lower euro, but again, what we're seeing now is that Europe is starting to get into, you know, some economic difficulties as well. Certainly the U.K., Spain, Ireland, and that is starting to spread. And that's both in the capital side as well as well as on the housing market. Japan is in that situation as well. We're really looking at countries like India and China, Brazil, a little bit of Russia, and those are the exporting areas where they're growing the fastest and they're going to be able to make the most.
GHARIB: Terry, I hate to jump in and interrupt because it sounds really interesting, but we've got -- that's all the time we have. Thank you so much for coming on our program this evening.
MCGRAW: Thank you, Susie. Yes, great to be with you.
GHARIB: My guest tonight, Terry McGraw -- we appreciate your time. Terry McGraw, chairman of the Business Roundtable.
