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.