Published on: Tuesday, October 12, 2010
Interpreting the “Economic Tea Leaves” from September
The Bureau of Labor Statistics announced the September job numbers and though the total non-farm employment (-95K) disappointed many, unemployment remained steady as a percentage (9.6 %) and there was private sector employment growth (+64K) with some revisions upward for prior months.
The environment remains "wait and see" until the election or beyond in many respects as companies stay on the side lines with plenty of cash and strong balance sheets and income statements to make a move. It remains all about business confidence.
The story of this economy remains slow growth for the next several quarters at 2.5 percent or so. This is much below what previous recoveries showed. The Fed and Ben Bernanke are displaying leadership with the Quantitative Easing
they are embarking on using monetary policy as insurance to prevent any further declines. What this means is they are buying long-term securities to keep interest rates down, in an attempt to inflate the economy.
The good news is, in the private sector, aggregate payroll earnings continue to show increases and the reasonably solid, but certainly not earth shattering, consumer spending patterns point to consumers paying down debt — not out of fear but out of appropriate deleveraging. All of this is good news.
We are hearing increasing positives from the recruiting community that the economy will start picking up next year — though our Recruiter Confidence Index
continues to hold steady around 50 percent or just above for the last 12 months.
This means that over the next six months recruiters are expecting growth in hiring (they estimate an increase of 14 percent in assignments), but at the 50 percent confidence level, recruiters are not saying this recovery is broad-based and strong. Only a couple of segments that show any real acceleration: healthcare, clean green technology and high-tech.
Companies are taking a long time to make hiring decisions, though the good news is retained executive recruiters are the most positive, which means companies are quietly hiring.Our view:
There is uncertainty but the elections have the potential to improve business confidence, if leadership out of Washington decides to make it so. Right now partisan positioning on both sides prevents a very positive view.
We can only hope that after the election "adults" will come forward in our government and stop the "bashing" of each other and focus on the problem of stimulating long-term economic growth by toning down the rhetoric. If the government gets down to America's business and focuses on generating sustainable growth, we can see things improve significantly, and everyone will be better off.
As Jack Welch said at the World Business Forum this week, the role of leadership in this uncertain environment is to step up and not make points but make it so.