U.S. unemployment is holding steady at a disheartening 9.6%. That only counts the people that are actually looking for a job. Add the people who have given up trying to find one (the underemployed) and the rate goes to 16.7%. Millions of Americans are struggling to keep their homes and feed their families. Too many of us know someone in that situation.
The pace of fulltime hiring is slow at best while contract or long term temporary hiring is almost robust. This contract hiring in the absence of fulltime hiring is a clear indication that businesses are just not ready to make fulltime hiring commitments and there are no indications that they will change their minds any time soon. From our vantage point as a staffing/recruiting company it is clear that the unemployment situation is not going to get a lot better any time soon.
And it’s not just business that are not hiring. Consumers that make up 70% of GNP spending are not hiring either. I know this is a play on words but it translates to their lack of spending. Consumer spending is at historic low while saving is at an all time high. Consumers are hoarding what little cash they have and until they start spending again and business sees the revenue coming in this malaise is not going to end.
Washington is looking to the small business community to lift us out of this morass yet they keep putting up barriers. It seems clear to this small business operator that few in the present administration or the houses of Congress clearly understand how prudent consumers, business owners/management and investors think. The lack of understanding isn’t surprising when you look at the makeup of the administration and congress. Most of the White house advisors are academics or politicos. Fifty-two Senators are lawyers and thirty-six percent (36%) of the House of Representatives were lawyers when they were elected. Where are all the business people?
What is holding us back from hiring and spending? Ineffective and counterproductive federal actions, based in ideology and not experience, have led to an environment of uncertainty and a huge lack of trust in our federal government.
They don’t seem to believe that the prospect of higher taxes, the lack of finality in financial regulation, the fog surrounding the future cost of the new health care legislation and real worry about how America is going to pay off its staggering debt will keep businesses from investing NOW.
It’s not a difficult concept to grasp nor is business’s behavior hard to understand. The cost of doing business requires prudent stewardship of available resources and that translates to a cautious business investment environment. We have to wait and see what hurdles we are going jump over and what these actions are going to cost before we start hiring and investing.
The just signed tax relief for small businesses (it is very uncertain which they are) is a case in point. Federal tax relief is increased on 2010/2011 investments but businesses have to SPEND $1.00 to get “relief’’ of a maximum of $.37. In a healthy economy tax relief is a great way to stimulate investment spending. But in this kind of environment it is going to take the prospect of increased revenue/income and some predictability of potential increased cost to get most businesses spending again. I believe that is the same stimulation that is needed for the American consumer to start spending again.
The lack of hiring and consumer spending and the fact that business are sitting on a trillion dollars of cash or more should be proof enough.
A. Steven Raab