Bay Area executives have soured about the region's economic outlook and have intensified their plans to chop jobs in the coming months, according to a new survey released Thursday.

The quarterly business confidence index compiled by the Bay Area Council plummeted, hitting 51 on a scale of 1 to 100. The summer 2011 reading on the index represented an 11-point drop from the reading for the spring -- and the worst quarterly decline since 2002.

"There is a lot of negative sentiment out there," said Michael Yoshikami, chief investment strategist with Walnut Creek-based YCMNet, an investment firm. "There is a lot of uncertainty."

The latest survey found that 21 percent of businesses in the Bay Area intend to increase staffing levels in the region in the coming six months. That's down sharply from the 33 percent that had planned to increase hiring in the spring survey.

"When CEOs are uncertain, they hold back on hiring," Yoshikami said.

An estimated 17 percent of Bay Area businesses plan to slash their regional workforce, the most recent study found. That was up from 13 percent of employers that were planning layoffs in the spring survey.

Bay Area executives said the prospect of rising health care costs has curbed their appetite to add workers.


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"The drop in business confidence in the Bay Area is consistent with what we're seeing nationwide," said Lenny Mendonca, a member of the executive committee of the Bay Area Council, and a director at McKinsey, a consulting firm.

The region's economy has eroded in recent months, business leaders told the researchers.

Business conditions in the Bay Area are getting worse, according to 26 percent of the executives surveyed for the summer report. During the spring, just 9 percent said things had become worse.

The summer survey found that an estimated 31 percent of businesses in the region saw an improving economy. In the spring survey, 64 percent of businesses said the Bay Area economy was on the upswing.

Despite the dreary outlook, business leaders said the Bay Area still is better off than the country generally.

"Our region's comparative economic advantages offer a ray of sunshine," Mendonca said.

Among them: Bay Area businesses have good access to capital, the region boasts a well-educated workforce, the area is close to global markets and the area has a strong entrepreneurial spirit.

The survey polled about 450 CEOs and top executives in the nine Bay Area counties. A reading above 50 for the index shows positive economic conditions and a reading below that shows a negative situation. The index is derived from a compilation of the executives' assessment of local and national conditions for the economy and their industries, as well as their hiring and firing plans.

The Bay Area and the nation should manage to avoid a second recession, Yoshikami said. But that doesn't mean boom times beckon.

"We will have a slow recovery," Yoshikami said. "But for most people, it's going to feel like the recession never ended."

Contact George Avalos at 925-977-8477.