Companies and Consumer Confidence

The lead article in today’s New York Times, “Employers Say Jobs Plan Won’t Lead to Hiring Spur,” describes some of the pluses and minuses of President Obama’s American Jobs Act, most importantly, the need for the economy to demonstrate sustained growth before hiring resumes in earnest.

It is consumer demand and increased business that drives hiring, and the President’s tax credit for hiring an unemployed worker will only help companies at the margin. On the other hand, the payroll tax cut, the main component of the plan, could generate increased spending, thus leading to that demand in the first place.

The President’s plan also allotted $35 billion to save teachers jobs as well as those of other public workers such as police and firemen, $30 billion to repair decrepit schools and $50 billion for infrastructure projects. These expenditures will directly save or create jobs but are unlikely to make it through the Republican-controlled Congress.

One major concern of analysts involves the six million workers who have been unemployed for six months or more. This is becoming a permanent underclass in our society and may represent structural unemployment that will be very difficult to reverse. Training programs would be desperately needed to help these people as the workplace continues to be transformed on an almost monthly basis due to the IT revolution and globalization.