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Businesses cite ‘poor sales’ as top reason for lack of hiring
Question of the Day
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.
Mr. Obama will offer 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 Friday, 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 Friday’s 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 response 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 Friday’s 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, unemployment 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.
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