http://online.wsj.com/article_email/SB10001424052702304259304576380323311523538-lMyQjAxMTAxMDEwMzExNDMyWj.html
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"Start where people are before you try to take them to where you want them to go." (Jim Rohn)
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According to a new report released Tuesday by the National Federation of Independent Business (a trade group that regularly surveys its membership of small businesses across America), May showed the worst hiring prospects in 8 months. This is the group of businesses where half of the private sector workforce is located and the group that many feel must be the hiring leader in any "recovery."
This is the first "recovery" in which, seven quarters in, there have been zero gains in aggregate wages and salaries.
The Business Roundtable CEO (roughly, the Top 200 companies) Economic Outlook survey, also released on Tuesday, found that the number of large companies that expected to grow their American workforces over the next 6 months far outnumbers those that anticipate shrinkage. So, what does this tell us?
Cathrine Rampell recites that this is, as one economist puts it, a "tale of two recoveries."
My thoughts on all of this are that, as I've said many times before, "capital" ultimately gets spent. At least in large companies, capital can only be held up so long and then it gets spent. For the smaller companies, their plight is not "exclusive" of large company spending. Many of them are the recipients of direct or indirect capital spending from the larger companies.
What's interesting (and sad) is that the economy is producing as much as it was before the downturn, but with 7 million fewer jobs (per Catherine Rampell in an earlier "Economix" post). So, business spending on employees has grown 2% since the recovery began but business spending on equipment and software has gone up 26%. A capital rebound that sharp and a labor rebound that slow have been recorded only once before: after the 1982 recession.
Structurally, equipment prices have been dropping either directly or through tax incentives that subsidize capital investments. So, capital has gotten much cheaper relative to labor.
Corporate profits (large companies) are at all time highs and companies are continuing to hoard cash. Many of the companies that are considering hiring say that they're scared off by the uncertain future costs of health care and other benefits.
Austan Goolsbee, chairman of the President's Council of Economic Advisers, takes the position (along with several other economists) that the relative prices of labor and capital are not the real problem: the biggest hurdle is that companies are loath to invest at all because economic growth is so slow. That's a position that's hard to argue against.
Jeff Immelt, who is chairman and CEO of GE and chairman of the President's Jobs and Competitiveness Council, weighed in this week in a Wall Street Journal article where he highlighted the work the council has been doing since he was appointed 90 days ago. His group has analyzed which actions are critical to accelerating job growth in high-potential sectors, while also addressing areas of concentrated unemployment. He lists "fast-action" steps that could create 1 million jobs in specific industries:
(1) Train workers for today's open jobs. There are more than 2 million open jobs in the U.S., in part because employers can't find workers with the advanced manufacturing skills they need.
(2) Streamline permitting. Cut red tape so job-creating construction and infrastructure projects can move forward.
(3) Facilitate small-business loans. Small Business Administration loans need to be made easier to get.
(4) Put construction workers back to work. More than 2 million construction workers don't have work. Making commercial buildings more energy efficient, for example, has tremendous positive potential.
The Jobs Council will deliver recommendations on more strategic questions (like ways to encourage foreign direct investment in the U.S.) in September.
I've mentioned in prior posts that Immelt, as CEO of GE over the last ten plus years, has presided over a loss of roughly 100,000 jobs in that company. Because of that, I'm not a big fan. Also because of that, he knows why he did what he did and is busy leading the charge on what to do about stemming the flow of jobs and investment elsewhere. I support that.
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