Busi­nesses cite ‘poor sales’ for lack of hir­ing

The Washington Times Weekly - - National - BY PA­TRICE HILL

The econ­omy last month of­fered up no new jobs in cel­e­bra­tion of La­bor Day and ap­pears in dan­ger of slip­ping back into re­ces­sion de­spite mas­sive ef­forts by Congress and the Fed­eral Re­serve in the past three years to keep it afloat.

The White House last week of­fered more pro­pos­als to try to gin up jobs to add to the 1.7 mil­lion cre­ated ear­lier in the re­cov­ery and beef up Pres­i­dent Obama’s prospects for re-elec­tion.

Mr. Obama of­fered a pot­pourri of re­newed pay­roll tax cuts, jobs tax cred­its, ex­tended un­em­ploy­ment in­sur­ance and tar­geted spend­ing on pub­lic in­fra­struc­ture jobs to put more than 1 mil­lion un­em­ployed con­struc­tion work­ers back to work.

Repub­li­cans have re­sponded with pro­pos­als to cut cor­po­rate tax rates, ex­tend tax cuts for up­per-in­come in­di­vid­u­als who of­ten run small busi­nesses, and roll back reg­u­la­tions im­posed by Mr. Obama in hopes that busi­nesses will re­spond by hir­ing more work­ers. In a move to­ward the GOP on Sept. 3, Mr. Obama pulled a smog reg­u­la­tion that busi­nesses had fin­gered as the most oner­ous of all.

While many of the pro­pos­als have merit, economists say, the fun­da­men­tal prob­lem is that busi­nesses don’t need to add work­ers be­cause their ex­ist­ing staff is suf­fi­cient to sat­isfy ane­mic lev­els of de­mand.

“There are no quick fixes on the hori­zon for the mil­lions who are still un­em­ployed,” said Richard Wahlquist, pres­i­dent of the Amer­i­can Staffing As­so­ci­a­tion. “Un­til busi­nesses see a sig­nif­i­cant and sus­tain­able uptick in de­mand for their prod­ucts and ser­vices, we will not see a mean­ing­ful in­crease in the num­ber of new per­ma­nent jobs.”

Ac­cord­ing to sur­veys con­ducted by the National Fed­er­a­tion of Independent Busi­ness, small busi­nesses, which em­ploy the most Amer­i­cans, have com­plained for months that “poor sales” are their big­gest prob­lem and the rea­son they aren’t hir­ing.

Large busi­nesses also have seen lit­tle rea­son to add to staff in a stag­nant U.S. mar­ket and col­lec­tively are sit­ting on more than $1 tril­lion in prof­its that they other­wise could de­ploy to beef up em­ploy­ment and ex­pand if new sales op­por­tu­ni­ties arose.

Heidi Shier­holz, an econ­o­mist at the Eco­nomic Pol­icy In­sti­tute, said the Sept. 3 jobs re­port showed that busi­nesses have no rea­son to hire. In fact, they even cut back the hours of their ex­ist­ing work­forces last month.

“The main is­sue is lack of de­mand,” she said. Em­ploy­ers have “sub­stan­tial room to meet un­met de­mand by in­creas­ing hours of ex­ist­ing work­ers; if pri­vate-sec­tor em­ploy­ers were to sim­ply re­store the hours of their work­ers back to pre-re­ces­sion lev­els, that would be equiv­a­lent to adding over 1.2 mil­lion jobs.”

The best job growth ex­pe­ri­enced in the re­cov­ery — more than 150,000 jobs a month — came at the be­gin­ning of this year af­ter a surge in de­mand at the end of last year. The up­surge in de­mand was prompted in part by a mort­gage re­fi­nance boom as 30-year mort­gage rates dropped to record lows in re-

“There are no quick fixes on the hori­zon for the mil­lions who are still un­em­ployed,” said Richard Wahlquist, pres­i­dent of the Amer­i­can Staffing As­so­ci­a­tion. “Un­til busi­nesses see a sig­nif­i­cant and sus­tain­able uptick in de­mand for their prod­ucts and ser vices, we will not see a mean­ing­ful in­crease in the num­ber of new per­ma­nent jobs.”

sponse to the Fed’s last eas­ing cam­paign — giv­ing con­sumers more cash to spend.

But the gains were fleet­ing and a re­peat of that Fed cam­paign seems im­prob­a­ble, although Fed-watch­ers ex­pect the cen­tral bank at a meet­ing this month to de­bate a re­vival of its pro­gram of pur­chas­ing Trea­sury bonds to lower long-term in­ter­est rates in light of the dis­mal jobs re­port.

“There was hope that the Amer­i­can consumer was mak­ing a come­back” at the end of last year, when back-to-school and Christ­mas sales were rel­a­tively ro­bust, and that led busi­nesses to add jobs, said Chris G. Christo­pher, an econ­o­mist at IHS Global.

“Much has changed” since then, he said. “Con­sumers are pulling back and they face tremen­dous head winds,” in­clud­ing pal­try wage gains, un- em­ploy­ment lin­ger­ing at more than 9 per­cent, ris­ing bankrupt­cies and fore­clo­sures, threats of bud­get cuts and higher taxes at all lev­els of govern­ment, and high prices for food, fuel and other essen­tials.

Con­sumers were con­tend­ing with all those ob­sta­cles even be­fore a mas­sive loss of con­fi­dence set in last month in the wake of the ac­ri­mo­nious debt de­bate in Congress and the worst fi­nan­cial rout since 2008.

Now, con­sumers have grown so cau­tious that “firms are not go­ing to pick up hir­ing any­time soon,” Mr. Christo­pher said. IHS puts the odds of the econ­omy tip­ping into re­ces­sion at 40 per­cent.

De­spite the dan­ger of a dou­ble-dip re­ces­sion and the flow­er­ing of pro­pos­als on jobs, an­a­lysts are not op­ti­mistic that any­thing sig­nif­i­cant tran­spire as big di­vi­sions re­main be­tween the White House and con­gres­sional Re- pub­li­cans over what to do.

While Mr. Obama wants to fol­low the clas­sic for­mula of sub­sti­tut­ing govern­ment spend­ing and de­mand for consumer spend­ing and de­mand to cre­ate jobs in con­struc­tion and other ar­eas, Repub­li­cans are adamantly op­posed to that ap­proach and are push­ing dereg­u­la­tion as the pri­mary al­ter­na­tive be­cause that would not add to the bud­get deficit.

“The po­lit­i­cal environment ap­pears to be so dys­func­tional at present that it seems highly un­likely any ma­jor new pol­icy rec­om­men­da­tions from the White House will be ap­proved by Congress,” said David Green­law, econ­o­mist at Mor­gan Stan­ley.

More­over, with the fight over the bud­get deficit sched­uled to heat up again with the re­turn of Congress, Washington is likely to end up do­ing more to dis­cour­age growth and job cre­ation than help it, he said, just as it did this sum­mer when po­lit­i­cal grand­stand­ing over the debt limit be­came a ma­jor drag on the econ­omy and helped cause the ten­u­ous growth seen to­day.

Mr. Green­law noted that Congress chose in­aus­pi­cious dates as dead­lines for the su­per­com­mit­tee it cre­ated to rec­om­mend an­other $1.5 tril­lion in po­ten­tially un­pop­u­lar and con­tro­ver­sial bud­get cuts. The com­mis­sion is re­quired to make its rec­om­men­da­tions just be­fore Thanks­giv­ing, and Congress must vote them up or down by Christ­mas — brack­et­ing the most im­por­tant sell­ing sea­son of the year when a quar­ter of all re­tail sales are made in the U.S.

That’s bad news for the econ­omy, he said.

“Given what we know now about the de­gree of con­ster­na­tion in the gen­eral pub­lic sur­round­ing the debt-ceil­ing de­bate, you couldn’t pick worse dates to reignite po­lit­i­cal para­noia on Main Street,” he said.

AS­SO­CI­ATED PRESS

Job Seek­ers line up for in­ter views dur­ing a job fair Sept. 1 in San Ma­teo, Calif. Em­ploy­ers added no net work­ers last month and the un­em­ploy­ment rate was un­changed, a sign that many were ner­vous the U.S. econ­omy is at risk of slip­ping into an­other re­ces­sion.

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