Tags: at&t | rich-poor | gap | economic

AT&T Chief: Rich-Poor Gap Skews Economic Signals

Monday, 14 May 2012 03:17 PM

 

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AT&T Inc. Chief Executive Officer Randall Stephenson said traditional economic indicators have become less reliable as the spending patterns of affluent and lower-income Americans grow further apart.

An economy of haves and have-nots is evident in both the consumer and business sectors, Stephenson said in an interview last week at Bloomberg headquarters in New York. Companies and individuals with money are spending it, while the rest are more constrained than usual, he said.

Stephenson, who runs the largest U.S. phone company, has a broad view of consumer and corporate spending. While he sees signs of strength in areas such as home construction, there’s a lingering slump in the number of new businesses being created. That makes it hard to predict the direction of the economy almost three years after the official end of the last recession.

“I’ve never seen it like this,” Stephenson said. “Small business starts are still negative. That used to be the early warning indicator. When you saw small business starts turn positive, that was a great sign.”

Government spending and near-zero interest rates have helped keep the U.S. economy growing, even as Europe falls back into recession. America’s GDP will expand 2.3 percent this year, while Europe’s economic output shrinks 0.3 percent, according to surveys of economists.

‘Alive and Well’

On the positive side, the high-end consumer market is “alive and well,” Stephenson said.

“They are spending money,” he said. Those consumers are so eager to upgrade their phones that it’s constraining Dallas-based AT&T’s network, Stephenson said. “They’ll upgrade as fast as you upgrade.”

AT&T also is looking at the need to increase spending on network facilities to handle new home construction, he said. That hasn’t happened in four or five years, Stephenson said.

The business sector’s continued doldrums are working against those trends, he said. While larger corporations are spending more on telecommunications, those investments are going toward efficiency and not toward expansion.

The real driver for us is “hiring and putting people on payroll -- that’s when our business catches leverage and starts to take off,” Stephenson said. “We’re still not seeing that.”

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