Consumers don't believe the recession is over, businesses aren't hiring, and the stock market has been stuck in neutral, except for manic-depressive mood swings. But there is a bull market in uncertainty. "What will it take for economic policymakers to understand that the chief problem today is uncertainty?" rang one recent Arizona editorial, thereby joining an amen chorus of business and government critics that has coalesced into conventional wisdom. Unemployment and underemployment have become chronic even as the overall economic indicators have stabilized and companies--especially big ones--are generating phenomenal profits.
The explanation of many businesses is blunt: We aren't hiring because we're uncertain about government policy. The best expression of this thesis came from the U.S. Chamber of Commerce, which released the results of a poll of small-business owners in late September concluding that uncertainty over health care was holding back the recovery: "Nearly 8 in 10 small business leaders expect their costs to increase as a result of the new law, and a majority say they will be less likely to hire new employees ... Small business leaders who are being counted on to grow jobs are deeply unsettled about the present and concerned about the future, and a tremendous amount of that uncertainty is due to the new health care law."
Let's not forget uncertainty about taxes and whether Congress will extend some, all or none of the Bush tax cuts of 2001 and 2003. When Congress adjourned to focus on the midterm elections rather than decide on tax rates for 2011, Republican House leader John Boehner jumped on the uncertainty bandwagon: "The question right now that the American people are asking is, Where are the jobs? And we don't have jobs ... because of uncertainty affecting families and small businesses. We can help clear out ... this uncertainty by extending all of the current tax rates and cutting spending."
Boehner knows a good election hook when he sees one, but the more thoughtful Paul Ryan, a Republican Congressman from Wisconsin, also sounded the uncertainty Klaxon. "I know uncertainty is a new economic buzzword," he said, "but for good reason: if we can reduce it, we'll unlock capital." To underscore the point, former General Electric boss Jack Welch recently chimed in that the Obama Administration is antibusiness, which he says has created a climate of uncertainty that undermines new hiring.
Well, poppycock. Large businesses aren't hiring for basic reasons. They are highly profitable even with fewer workers. They have spent billions on technologies that have made them more efficient and productive. And they are adding jobs abroad--where the growth is. They are certain that they can service a still highly affluent American market with fewer workers. In fact, the companies of the S&P 500--the epitome of corporate America--are poised to report very strong earnings for the third quarter, continuing a two-year run in which they've reaped hundreds of billions in profit even as employment rolls have shrunk.
Small businesses aren't hiring mostly because economic activity is muted, consumers are paying off debts while saving more and spending somewhat less, and loans for expansion are difficult to obtain.