NYTimes on Job Creation: Yes! No! Maybe!


In an apparent bid to completely confuse their readers, the NYTimes today has 3 separate stories on lagging job creation and the economic expansion.

The first one, in the Business section, answers the issue with a resounding No:

“Job growth is likely to remain tepid even as the economy moves ahead, according to a survey of professional forecasters by the Federal Reserve Bank of Philadelphia. Indeed, the bank said yesterday, the economists’ outlook for employment has grown gloomier even as their predictions of economic expansion are becoming more robust.

Economists have been puzzled for months by the sluggishness of the employment market. The new forecast suggests that they have come to terms with the pattern established in this recovery: fast economic growth being driven by even faster expansion in productivity, with businesses meeting demand by squeezing more output from their current employees instead of hiring more workers.”

The second article is decidely more rosy.

Its in a special N.Y. Times section on small business, and is titled Optimism, and Hiring, Appear to Be on the Rise:

“In economic terms, spring may finally be arriving for small business — a little sooner, it seems, than for corporate America.

Because data collection and analysis can take at least a year, there are no hard statistics about the state of small business today, said Chad Moutray, chief economist for the Office of Advocacy of the Small Business Administration. And economic observers are wary about predicting growth after a series of false starts followed the 2001 recession.

Nevertheless, a general sense of optimism seems to prevail among small-business owners, one that is far greater than a year ago, said William C. Dunkelberg, chief economist for the National Federation of Independent Business, a small-business advocacy group in Washington that conducts a monthly survey measuring such things. Moreover, Mr. Dunkelberg said, many small businesses — defined by the Small Business Administration as those that employ fewer than 500 workers — also reported plans for increased capital spending and investment in inventories.”

The third article, “The Big Question: To Grow or Not to Grow?,” looks a the specific problems facing small businesses:

“Interviews with a sampling of small businesses indicate that the reasons to expand — or not — are as varied as the companies themselves. The decision may be driven by anticipated customer demand, fear of the competition or an owner’s desire to remain at a manageable size. Some businesses must grow constantly to sustain themselves, while for others — a tiny graphic design company, for example — small can be an asset.

The Small Business Administration classifies as small any company with fewer than 500 workers. Such businesses, roughly 23 million, account for more than 99 percent of all employers, and more than half the people working in the private sector, according to the agency.

Size matters, because small businesses can reap different benefits, depending on revenues and the number of employees. In New Jersey, for example, companies employing fewer than 100 people are exempt from some antipollution regulations, according to the National Federation of Independent Business, an advocacy group in Washington.

There are more classifications that provide benefits to companies in particular industries, from furniture wholesalers with fewer than 100 employees to state banks with less than $100 million in assets, the federation says.”

The piece also considers the thought process by which small businesses decide whether or not to make new hires:

“As companies employ more people, they face other hurdles because they become subject to more regulatory requirements. These are important for companies to consider, said Patrick J. Cleary, senior vice president for public and external affairs at the National Association of Manufacturers, a trade group in Washington.

The Family and Medical Leave Act, for example, kicks in when a company has more than 50 employees. “Once you cross that 50 threshold, now all 50 employees get 12 weeks of unpaid leave, which is daunting for a small employer,” Mr. Cleary said. So growing to 51 from 49 becomes significant; a company could choose to hire not just one employee but a few in anticipation that some may take a leave, or not to hire at all to avoid that possibility, he said.

Another rule requires companies with more than 15 employees to allow those who lose their jobs to keep their company-provided health insurance for several months, if the employees pay the premium, Mr. O’Keefe of Fine Point said. He said his company had grown and shrunk so many times that it had crossed that 15-employee line more than once. “There are certain things, as small companies, that you don’t have to offer your employees,” Mr. O’Keefe said. “Small companies don’t think of that. As we’ve been growing, we’ve never thought about 401(k)’s. As we’re growing, we’re realizing how important these benefit packages are to maintaining employee loyalty.”

But all is not wonderful. Even the Optimism article notes that:

Sales for many small businesses are still slower than their owners would like. And, despite some cuts, many complain that taxes are still too high.

There is also the price of health and other insurance, pushed constantly higher by post-Sept. 11 jitters and soaring medical costs. The expense and availability of insurance is the biggest problem cited by small-business owners responding to [National Federation of Independent Business] survey.

Insurance costs certainly have affected Mr. Miller. He remains cautious about expanding, taking a wait-and-see attitude in large part because of coverage worries. “My general liability insurance went up 30 percent in the last year,” Mr. Miller said. “And medical insurance goes up by 16 to 18 percent every year, even though we’ve increased out-of-pocket expenses for employees.”

As for Ms. Sano, who does not offer medical insurance to employees, she, too, complained that the rates she must pay for liability coverage, workers’ compensation and property insurance are too high.

The first two are particularly insightful; All three are worth reading . . .

Jobs Expected to Continue to Lag Economy
N.Y. Times, February 24, 2004

Optimism, and Hiring, Appear to Be on the Rise
N.Y. Times, February 24, 2004

The Big Question: To Grow or Not to Grow?
N.Y. Times, February 24, 2004

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