Monday, March 08, 2010

You Got This Round?

More reason to suspect that we're unlikely to see a robust jobs recovery anytime soon comes from an article about employers and consumers asking Who will blink first?:

Therein lies the standoff that helps explain the weakness of the recovery and the depth of the jobs crisis. Each side--employers on one, consumers on the other--is waiting for the other to spend more. Until then, the recovery will likely feel shaky. And job openings will be few.

Which side will blink first?

Many economists predict it will be businesses. Sometime this year, many companies are likely to decide they must replace worn-out equipment or they can't squeeze any more output from their existing staff, according to estimates from Moody's and IHS Global Insight. Some will then ramp up hiring.

Yet business expansion and hiring are likely to remain so modest that it could take until 2011 or 2012 for consumers to respond by opening their wallets wide, Moody's and IHS Global Insight predict. Once they do, households are expected to finally unleash a pent-up demand for appliances, clothes and cars.

Until then, consumers and employers will likely remain wary of hiring or spending much. The jobless rate, now 9.7 percent, will stay high. And employers will create nowhere near the roughly 10 million jobs that economists say are needed to restore the job market to its pre-recession health.

"There's a little bit of a standoff--a chicken-and-egg problem," said Robert Reich, a professor of public policy at University of California, Berkeley.

Reich holds out the possibility the stalemate will end soon. But short of a major industrial innovation--some new energy technology, for instance--he thinks businesses will remain slow to hire and consumers wary of spending freely for most of this year.

The government likely won't help much. Stimulus spending is waning. So are the Federal Reserve's emergency support programs. That leaves more of the job-creation burden for employers and consumers.

That doesn't mean that the government won't pretend that it's pitching in to help create jobs. Another fifteen billion piled on our mountain of debt is relatively insignificant, but it's maddening that we're spending any amount money that everyone knows won't make a difference. The only thing that's likely to break this employer-consumer gridlock is for both sides to regain the trust and confidence they need to open their wallets again. And that will only come with time. More government spending in the meantime will do nothing to increase trust and confidence for either group and, especially in the case of many employers, will likely only further delay their willingness to start making long-term investments again.

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