US employers waiting and watching before hiring
Sunday, June 3, 2012
Business has picked up. Yet American companies are too nervous to step up hiring.
The economy seems so gripped by uncertainties that many employers have decided to manage with the staff they have. They aren't convinced their customer demand will keep growing. Or they worry that Europe's festering debt crisis could infect the global economy. Or they aren't sure what Congress will do, if anything, about taxes and spending in coming months.
All that helps explain why U.S. employers added just 69,000 jobs in May, the fewest in a year and the third straight month of weak job growth.
"If you're anxious, you sit on your hands," said Chad Moutray, chief economist at the National Association of Manufacturers.
The U.S. government is also nearing its debt ceiling. It was just last summer that a bickering Congress rattled markets by nearly allowing the government to default on its debt.
State and local spending levels are uncertain or shrinking as governments try to shrink their own debts. The result is smaller budgets for schools, transportation projects and services.
Companies also complain that changes in environmental regulations and business subsidies are too hard to predict and plan for.
Here's a look at why some individual employers remain hesitant to hire:
For many companies that build highways, hiring plans are on hold while Congress debates long-term plans to pay for construction projects.
"I've got paving crews that are ready, willing to go to work next week, but I don't have contracts that I can have them go to work on," said Ed Dalrymple, vice president of Chemung Contracting Corp., based in Elmira, NY.
The company, which operates gravel quarries and asphalt plants and does highway and airport runway paving, relies heavily on government work in New York, Pennsylvania and Virginia.
"There's work that needs to be done, but none of the states have authorized it," Dalrymple said. "If you look at the transportation bill in Congress, it just sits there."
Jason Speer is nervously watching Congress and possible tax changes as Bush-era income tax cuts near expiration at year's end. He's a vice president of Quality Float Works of Schaumberg, Ill., which makes devices to monitor fluid levels in tanks.
Speer says he'd feel a lot better about hiring later this year if it weren't for the uncertainty about federal taxes. Unable to anticipate his company's costs, Speer says he can't make decisions about growth and hiring.
"We don't know if there's something around the corner that's going to hurt our business," Speer says.
Sales in the United States, the Middle East and South Asia have been strong, he says. And the company expects to grow 15 percent this year. But Europe has been a drag: Sales to the region are down 50 to 60 percent this year.
The company added two jobs this year but would have added a third if European sales hadn't suffered.
"If that business was still what it was, we would have already hired someone to keep up with it," Speer says.
John Hensley employs nine people at Lark Cake Shop, a specialty bakery in Los Angeles' Silver Lake neighborhood. Sales are up over last year. Yet Hensley doesn't feel comfortable hiring.
He's worried the economy may be staring at another slowdown. And he's uneasy over whether Congress will renew Social Security tax cuts.
"It definitely doesn't put you in the frame of mind to want to hire," Hensley says.
The prospect of a worsening European debt crisis that could hurt U.S. banks, the stock market and consumer confidence is a concern for him, too.
"If people feel like everything is going badly, then they're not going to be in the mood to spend money," he says. "There just seems to be so much uncertainty out there."
NRG Systems, a Hinesburg, Vt., maker of sensors to measure wind speeds for the energy industry, announced the first layoffs in its 30-year history in mid-May.
The U.S. wind industry is in the doldrums. That's because a key renewable-energy subsidy is set to expire later this year, electricity demand is weak and electricity prices are low because of lower natural gas prices.
"This is the worst it's ever been," said Abby White, a company manager. "The U.S. market has pretty much dried up."
White said the main problem is the future is too cloudy. Without knowing what federal policy will be in place, companies can't plan.
"The lowest-risk thing to do is to stop altogether," White said.
An April survey of 122 technology executives by KPMG found that employers weren't expecting to expand their payrolls as aggressively this year as they did last year. The main reason: Most of them are bracing for slower revenue growth.
The fallout from Europe's shaky economy looms as the biggest concern. But slowing economies in Asia are also contributing to a more cautious approach to hiring, said Gary Matuszak of KPMG.
There's not much confidence in the U.S. economy, either. Thirty percent of the survey respondents predicted that the economy won't fully regain its health until 2014. Thirty-three percent expect it will be 2015 or later before the economy returns to where it was before the financial meltdown of 2008.
Alan Gaynor's New York architectural design firm has put off hiring because his real estate clients are uneasy about starting projects in an uncertain global economy.
"It's a wait-and-see attitude they have," Gaynor said. "Everyone's a little nervous. The economy's growing a lot slower than anyone would have liked."
Gaynor's firm employs 15, the same as a year ago. He cites gridlock in Congress and the slowing economies in China and India as reasons for his clients' insecurity.
One client has been on the verge of starting a $30 million project in Manhattan.
"They have been ready to pull the trigger for six months or longer — but they're not doing," Gaynor says.
Gasoline demand in the U.S. has fallen for 62 straight weeks, according to MasterCard Spending Pulse, as drivers commute and travel less. Demand for diesel, used by trucks to ship goods, has also been weak.
"Until the economy strengthens, there won't be a need for our products," said Bill Day, a spokesman for Valero Energy, a refiner based in San Antonio.
Valero isn't cutting jobs. It needs the same number of people to run a refinery whether it's operating at full strength or not. But Day said tighter environmental regulations and permit requirements, along with weak demand, are hindering the company's ability to grow.
The sluggish economy has been a factor in Alice Lerman's decision not to expand her Chicago-area pet supplies store, Barker and Meowsky. She hires only when one of her seven full-time and five part-time staffers leave.
"We really don't know exactly what's going to happen" with the economy, Lerman says.
Rather than expand her company, she says she's been tilting its focus toward services that big-box stores don't provide. She hasn't raised her prices and has even lowered some of them.
"We can't affect what's going on in the outside, but we can affect what's going on internally," Lerman says.
Caring Senior Service is hiring, but not as much as it had expected to, said CEO Jeff Salter. One factor has been high unemployment itself: People who are out of work are taking over caregiving for elderly and sick relatives that the company would normally handle. That's reduced demand for services the company provides at 42 locations in 12 states.
AP Business Writers Joshua Freed in Minneapolis, Joyce Rosenberg and Candice Choi in New York, Michael Liedtke in San Francisco and Alex Veiga in Los Angeles contributed to this report.
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