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More Hiring Than Firing

A survey of leading economists shows more businesses are actually hiring than cutting workers. But growth remains slow, and political disagreement is rampant when it comes to moving the unemployment needle.

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Businesses are moving in the right direction when it comes to hiring, with more adding jobs than cutting them, a new survey of leading economists shows. Plus, more business owners say they plan to keep hiring in the coming months.

The survey, conducted for the National Association of Business Economics, shows 31 percent of businesses added to their payrolls in the second quarter of this year, while 14 percent cut jobs. It’s a dramatic reversal from the depths of the recession in the second quarter of 2009, when only 6 percent of businesses added workers, and 36 percent were cutting jobs.

Further, the survey shows 39 percent of businesses expect to add workers, the highest level since January 2008, near the beginning of a recession that has driven the U.S. unemployment rate to its current level of 9.5 percent.

Those numbers are good news. But the 84 economists who took part in the survey don’t exactly expect a booming economy. Sixty-seven percent of them expect the U.S. economy to grow by more than 2 percent this year, but only 20 percent expect gross domestic product growth of more than 3 percent.

“NABE’s July 2010 Industry Survey confirms that the U.S. recovery continued through the second quarter, although at a slower pace than earlier in the year,” said William Strauss of the Federal Reserve Bank of Chicago, in a release. “Industry demand increased for a fourth consecutive quarter, although at a slower pace. Price and cost pressures were contained, allowing profits to edge higher. The labor market continued to improve, with increases in current hiring and a rise in the percentage of firms planning to add workers over the next six months.”

The economists’ outlook is similar to that of small- and medium-size-business owners surveyed by business consulting firm Vistage International. But it runs counter to another survey released last week by the National Federation of Independent Business that shows deep pessimism among small-business owners.

These contradictory reports reflect the uncertainty that is plaguing businesses as the economy sluggishly returns to life after its collapse in late 2008 with the bursting of the housing bubble and Wall Street meltdown.

The Vistage survey, for instance, shows 44 percent of chief executives of small businesses plan to expand in the second half of the year. “CEOs of small to medium-size companies have adjusted to the lean economy, are doing more with less, and have positioned their companies for success,” said Vistage International CEO Rafael Pastor, of the second-quarter survey results. “Their continued confidence sends a strong message that small and medium-size business will be among those who will lead our overall economic recovery.”

But the NFIB survey released last week showed a drop in small-business confidence in June, the first such drop after gains throughout the spring. And like other business lobbying groups, the NFIB blames the government.

"Owners do not trust the economic policies in place or proposed, and they are distressed by global and national developments that make the future more uncertain," NFIB chief economist William Dunkelberg said.

The NFIB survey, which is done on a monthly basis while the Vistage and economists’ surveys look at quarters, shows that 10 percent of businesses surveyed in June plan to make hires, while 8 percent plan to cut employment.

So with all this contradiction in the air, the blame game in Washington for the nation’s undeniably high current unemployment is in full swing in what is, after all, an election year.

The U.S. Chamber of Commerce—which has opposed such Obama administration initiatives as health care reform, tax, and energy policy—issued a blistering open letter to the administration and Congress last week, calling for a radical change in direction.

“Instead of continuing their partnership with the business community and embracing proven ideas for job creation, they vilified industries while embarking on an ill-advised course of government expansion, major tax increases, massive deficits, and job-destroying regulations,” the letter said.

The Chamber, the nation’s largest business lobbying group, is calling on the administration and Congress to:

  • Extend the Bush tax cuts passed in the early 2000s and set to expire this year.
  • Reform entitlement programs to lessen their drag on the economy.
  • Pass free-trade agreements with Colombia, Panama, and South Korea.
  • And ease regulatory burdens on business.

Granted, Chamber CEO Tom Donohue said during a meeting last week, some businesses may be hiring. But they aren’t hiring at nearly the rate needed to replace the tens of millions of jobs lost in the recession, and he and other business leaders think their suggestions are the ticket to get more hiring done.

Obama, for his part, went on the offensive over the weekend, claiming Republicans in Congress are blocking the stimulus needed to get small businesses back in the business of hiring. He accuses Republicans of filibustering extension of unemployment benefits to those who are without jobs; those benefits could go to people who will immediately spend the money on goods and services, stimulating the economy. And, Obama said in his weekly radio and online address this weekend, that Republicans are also standing in the way of measures designed to help small business.

“Consider what that obstruction means for our small businesses—the growth engines that create two of every three new jobs in this country. A lot of small businesses still have trouble getting the loans and capital they need to keep their doors open and hire new workers. So we proposed steps to get them that help: Eliminating capital gains taxes on investments. Establishing a fund for small lenders to help small businesses. Enhancing successful SBA programs that help them access the capital they need,” Obama said. “But again and again, a partisan minority in the Senate said no, and used procedural tactics to block a simple, up-or-down vote.”


Kent Bernhard Jr. is News Editor of Portfolio.com

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