Mark Zandi: 'Help Wanted' Needs Help

Mark Zandi joins those calling for the government to do something to help to stimulate employment (Help Small Businesses Hire Again, NY Times):

...It is no accident that the recession ended just as Washington’s fiscal stimulus program began providing its maximum impetus to the economy. ...

Still, the recovery remains fragile. ... In order to ensure that today’s tentative recovery becomes a lasting expansion, the government must now make it a priority to deal with employment — particularly among small businesses.

Small businesses are especially vital to job growth. ... In their recent efforts to recharge the economy, policy makers have all but forgotten small business, finding it both easier and more visible to help large multinational firms. Unfortunately, though, big business can’t provide the jobs needed to power the economy forward.

Businesses ... still aren’t hiring. Unless they start doing so soon, consumers won’t have the wherewithal to keep spending, and the economy could slip back into recession. ...

Employment growth historically lags a pickup in gross domestic product. But firms typically increase production by first increasing workers’ hours and adding temporary help. Neither has happened so far: working hours remain stuck at a record low of 33 hours a week, and the number of temporary jobs is still in decline...

Small firms are now struggling to obtain credit; their principal lenders, small banks, are under intense pressure... Credit card lenders, another key source of loans to small business, have aggressively raised their underwriting standards. Policy makers could offer quick relief by empowering the Small Business Administration to provide more credit. ...

To help small companies with cash flow, policy makers should also extend provisions in the current stimulus bill that allow money-losing firms to receive refunds of taxes paid on profits earned in previous years. (In return, they agree to pay higher taxes in the future.) ...

Finally, the government could help minimize the number of new job losses by promoting work-share programs. Nothing damages morale ... more than layoffs... Layoffs are also costly... Seventeen states offer effective work-share programs. Under these arrangements, employers cut workers’ hours — not their jobs — and states make up a portion of workers’ lost wages with unemployment insurance payments. Congress should provide financing to expand such programs nationwide.

These policy steps would not be free, but they could be surprisingly economical. ... This kind of help from Washington could help sustain the new signs of recovery and firmly put the recession behind us.

It's a start, but more than that is needed (and not all of the help should go to business, e.g. extending unemployment benefits would help households having trouble finding employment and stimulate aggregate demand at the same time).

Comments

[damienhaas:]

Few Observations.

First point
The demand for goods in US are serious impaired by this crisis so the demand will not come back. Providing more credit to them will not help. There is a need to restructure the business model and it take market force to make that work.

Second
Job sharing will not work as it affect productivity. If the demand is less and you do not need 2 people, normally the more productive employee will be kept and left the other to be retrench. Imagine 2 people doing the same job just less hours?

Thirdly
Providing more unemployment benefits now will give more money to people who lost job more time to look for job. But they will unlikely to spurge that money as most of them will be cautious about their situation. So most likely they will save it and that will undermine the stimulus effect expected by the government.

Nov 03 08:11 AM

[jerrydd:]

Zandi is correct. Here is how I'd do it and what Obama would do if he could without congress and solve several problems at once.

We can have a stimulus that costs almost nothing to the taxpayer, in fact paid a lot by Iran, Russia, oil dictators!!

How is start up loans for RE companies and energy eff ones. Let most anyone with a good business plan through the SBA get start up loans to build or install windgenerators, solar CSP unit, CHP, small lightweight, aero 3 wheel EV's, etc. Then loans to buy, install, etc these.

Loans for home, building eff upgrades from windows, insulation, etc are next.

All these can be paid for in energy savings in 5 yrs so no new income costs either. This will create about 3 million jobs directly and probably 6 million indirectly of people supporting them.

Next is a fossil fuel tax to pay their full cost of the direct, indirect subsidies we already pay in our income tax, health care, etc. it's time those who make, benefit from those costs to pay them It should be a $1.50/gal on oil and about double the price of coal.

But you say a tax will kill the economy. Not if it's put in over 2 yrs at 4% each month and loans given to buy more eff cars, etc to cut people's costs. Switching trucks, semi's to NG is very cost effective now being under 50% of the cost of diesel/gasoline. This can in 5 yrs cut imported oil needs.

The beauty of this is oil, coal will drop in price making Iran, Russia, oil dictators pay most of the oil tax, coal is only 25% of your electric bill so it won't go up much.

But new, more eff cars, trucks, EV's, PHEV's and mass transit will create more new jobs too.

The fossil fuel tax revenue, 1/3 would go to a tax cut so those people paying it have the extra money needed if they continue to use the same amount or better, use less and have extra income, the more likely outcome. 1/3 to to help switching to more eff cars, trucks, homes, buildings and 1/3 to balance the budget fossil fuels have been a large part in making.

So this program would have a net increase of about 8-10 million jobs of both direct and supporting those who have the new jobs, solve our imported oil problem, let us leave the Persian gulf between the 2 are about $1T/yr in a few yrs if we don't, stop subsidizing our enemies, oil/coal corporations and balance the budget.. All at little cost to the gov, in fact get rid of our debt on our children and make our country strong again.

Or we will be broke, at war, our enemies strong and we will be weak. To me it's the only real patriotic way to go.

Nov 03 09:57 AM

[Tom E.:]

Want to create jobs? Break up the big companies. When the hammer came down on the IBM monopoly in the 60-70s, it started a technology revolution.

Nov 03 10:16 AM

[mkttrdr:]

lol
Don't know if the Gdp numbers , which was pumped up by stimulus, tell the whole picture. All the WH and Hill wanted to say was the great recession is over. Big deal-big words. But...
Not by a long shot. Enjoy the double dip. The consumer will never spend the ways of the past. Small companies employ 75% of all workers; and they are cutting corners, costs and jobs. Limited credit lines w/ high corporate/business taxes in the US are destoying the recovery. Flat tax of 20% would make cents!

Nov 03 11:41 AM

[JeffDB:]

and don't forget the state and local governments, many of whom are going deep into the hole in debt as their spending has remained nearly constant and in some cases have increased while their revenues have dropped, precipitously in many cases.

BUT, there are needs everywhere and our government is already trillions in debt, with somewhere in the vicinity of a $1.4 Trillion deficit, and $ Trillion + deficits as far as the eye can see. All that with the backdrop of a dollar that has been falling significantly, more than 15% from highs earlier in the year, and many countries & economists expressing fear that it could fall off a cliff.

Money allegedly doesn't grow on trees, but if we print it as though it were free it quickly heads towards its inherent value. Zero.

Nov 04 12:02 AM