Thursday, July 25, 2013

Unemployment Will Get Worse in 2014

President Barack Obama gave a major economic policy speech yesterday. Here’s what he didn’t say, and probably won’t ever say: Businesses will not begin new, significant hiring this year or in 2014.

Business leaders around the country tell me they’re not thinking about new hires right now. Rather, their sole focus is on how to win new customers. Too few people know this, but employees follow customer growth, not the other way around. Most importantly, businesses want to survive. They’ve cut everything to the bone and stored cash, and they won’t risk anything until they experience customer growth. New hires don’t solve their problems.

Because of this, I would bet all of my Gallup stock that unemployment will get worse in 2014. Don’t expect the president to tell you that.

“But wait,” you say. “Unemployment has begun to go down. That’s what I hear from the White House and Wall Street.” Don’t buy it. Wall Street wants to keep inflating the latest stock bubble and the White House, regardless of its occupant, always has an interest in giving you the best possible employment picture.

As regular readers of this blog already know, the unemployment measure the Bureau of Labor Statistics (BLS) reports is incomplete. The BLS defines unemployment as the percentage of people looking for a job who can’t find one. So, for instance, if you’ve given up on trying to find a job for the rest of the year, you’re not considered unemployed because you quit searching. In addition, if you mow my lawn and it took you one hour or longer to complete and I gave you at least $20 for the task, the federal government doesn’t count you as unemployed. That’s even if you’re an out-of-work engineer and lawn mowing is the only work you can get right now.

The closely followed, single BLS unemployment metric, now 7.6%, fails to reflect the actual state of things: Unemployment and underemployment is, according to Gallup, 17.2%. That means more than 20 million Americans are unemployed or grossly underemployed. And here’s a much more significant metric: only 44.7% of adults 18 years and older in the U.S. are in a full-time job, according to Gallup’s Payroll to Population (P2P) metric.

Bluntly, the jobs picture is not improving, despite what you hear in the news, and it will get worse. Yes, businesses are sitting on billions of dollars in cash and productivity gains and the stock market has been rallying. But those businesses are hoarding that cash because they still lack that all-important state of mind and spirit: confidence.

Here, Gallup’s findings aren’t much more promising. America’s 6 million small businesses are, by far, the biggest drivers of new job creation. Yet earlier this year, the Wells Fargo/Gallup Small Business Index found 30% of small-business owners say they’re not hiring because they’re worried they may no longer be in business in 12 months. Moreover, new business startups -- driven by entrepreneurs’ confidence -- have fallen below 400,000 per year, in my estimate, and the country needs a bare minimum of 1 million new startups annually to fix the employment problem. No confidence, no startups, no growth, no jobs.

What’s damaging business confidence? In that same Wells Fargo/Gallup survey, small-business owners say healthcare costs (54%) and taxes on small businesses (53%) are hurting their operating environment “a lot,” making these the top two confidence-busters.

These data are simply the quantification of an American free-enterprise engine that desperately needs fuel. Too many businesses have lost their free-enterprise spirit, and subsequently their ability to take risks. And they’re not likely to get that confidence back until they’re far less burdened by healthcare costs and regulations -- and until America finally simplifies its tax code and makes taxes far less onerous on businesses.

Presidential policy speeches alone will not reignite free enterprise in America. Without confidence, risk-taking, and new customers, there won’t be new jobs.

16 comments:

  1. Until we are able to curtail corporate greed, the country will be hostage to the whims of big companies and CEOs who don't want to let go of their cash until they can accumulate yet more cash. That's why I am hopeful that small businesses will save the day...I'd bet my money on that.

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  2. Sounds like we need a Second New Deal. This same lack of confidence led to the down spiral that became the Great Depression. "We have nothing to fear but fear itself" said the great FDR. Sadly, I'm not holding my breathe with this President.

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  3. Actually, what we need is for government to get out of the way. Cut the amount of regulation, repeal the Affordable Health Care Act (i.e., Obamacare... which isn't about health care, its about health care insurance), curb government spending which is sucking capital out of the markets and simplify the tax code so it allows businesses to make decisions that driven by economics rather than exploiting IRC provisions. Our policies were written years back when the US did not have to worry about competing in the world marketplace... our policies drive business and capital away to other countries. Shame on us for buying into this class envy nonsense, and for subsidizing politicians and educational institutions that advocate this hogwash. We have mortgaged our children's future. The question is whether we will now also mortgage our grandchildren's future.

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  4. Corporate greed? You mean those same corporations (Gallup)that employ millions of people and produce things as well as providing a vessel for investors to invest money?

    HOW ABOUT THIS...ts time we curtail class warfare and division. America is at its best when we are focused on increasing productivity, individuals striving to be their best and producing ideas and goods and services for all the world. DUMB.

    BTW-How do you curtail "corporate greed" anyway?

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  5. What do you say to a business leader to convince her to take a risk and hire someone? Because until she does, that person will not be a customer -- and businesses need customers. In other words, we need to find that spark of bravery among business leaders. They must start the economic ball rolling again.

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  6. This is a sobering article, it comes close to but doesn't quite explore the underlying issues.

    1. There's a whole attitude that workers are replaceable pieces of equipment with no intrinsic worth, except for the top execs, who for some reason are not replaceable with people who'd be willing to work for millions instead of hundreds of millions of dollars.

    2. The abandonment of community or team mentality. It's "all about me" not about the company, the shareholders, the employees.

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  7. No matter what the policy of any administration, people are creative and will do the best they can, and continue to innovate. But surely, (government) policy also affects the amount of business startups.
    A free & virtuous society - doesn't work without both - is what we need. Will it happen to a much greater degree in my lifetime? It does seem we are on a downward slide in the virtue department, which does not bode well for the future. Without virtue, more government regulation is in store.

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  8. American workers simply want an opportunity to make a fair and decent living with good jobs. They deserve this as much as the mega million CEO's.

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  9. An economy that continues to depend of "growth" as the source of it wealth and prosperity is really rather short sighted. If we look at energy resources, selfish life styles, spending on items that divide people rather than bring them together; we should see that a modified or different economic system would be better. We need to define "wealth" and "value" in terms other than monetary. An economy based on social values, wise resource use and simpler, less oppulant living would extend our finite resources longer and allow for the social discussions needed to transition to a different economic system and life styles. This is a time to reflect, change direction and plan for a different future rather than waiting for shortages to force a new future on us. There are very few people bennefiting for the current economic system. The difference and division will only increase and this will lead to unrest. A new system that understands that if people are working, this might be preferrable to social unreast and the carnage that comes with that unrest and bennefit far more people.

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  10. Thank you for the reality check... I know that we are being fed a bunch of crap from the current administration and their cronies, but didn't know that the concensus amongst major industry was this bleak and that things were as bad as you presented. If America is to survive companies need to horde their hard earned monies for jobs to exist in the future, but also there needs to be a big reset on costs as wages remain static - at best - for those with full time employment.

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  11. you idiot. Why should I hire someone and have nothing for him to do. Then he stands around and keeps someone else from working. Then they decide they aren't getting paid enough and want to go on strike because they have nothing else to do. Only Obama can do stuff like that.

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  12. Our particular problem is that we cannot find anyone around here that wants a good honest job. In a town that is mid-size, very close to another like city, we got one applicant as we do everytime we advertise for help. Good wages, insurance etc. It's the same for every other construction company. I think the problem is with unemployment benefits lasting as long as they do. Why would someone want to work hard when they could sit on their butt and do nothing and still get paid. And qualify for food stamps. Integrity? Self worth? Can't miss'em if you never had them. It is so frustrating trying to meet deadlines and consider before you bid a badly needed job, if you have enough workers to do the job!

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  13. Simple, get a real leader with exec experience in the white house.

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  14. You'll bet all your Gallup stock on the job market getting worse in 2014? I'll take that bet. Clearly I have more confidence in the resiliency and creativity of the American people than you do. I'll be happy to collect your ridiculously large nest egg that you've created through that stock. But let's be honest. You would never bet all of your stock on such a ridiculous statement. But it looks good in print.

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  15. Bring the jobs back to America! The jobs were moved to Asia and China, now it is time to bring them back.

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  16. First of all, companies that went overseas are not coming back to America. Second, a newer "New Deal" will not kickstart this country—asking for federal help when they are the cause of the problem in the first place.
    We need to be taxed less, new health care retracted, tax breaks for small businesses and not for mega corporations. BANK REGULATIONS and a WALL STREET TAX is an absolute must.
    Many many many heinous the government spends money must absolutely be cut. I'm talking dumping lobbyists, private contractors, military spending, mandating pharmaceutical giants to lower cost, end foreign aid, rid immigration reform due to it combined with new health care will allow illegals to not have health insurance for about 15 years, thus making them cheaper to hire than citizens.
    So many things that are obvious must happen. And since both major parties are attached to the same entities, why not try something new, people? This isn't some sort of game. We are looking at the potential for the market to crash, which could put us in the same boat as Cyprus. I know I don't want to pay a levy on the meager money I still have left in the bank. And don't say it can't happen—look at how many things have happened that people claimed never would. As I recall, the new health care was one. A 2nd depression, which we have now been a part of for a few years. Time to grow up and face reality. The US is losing respect from almost every country in the world. Not good.

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