Friday, September 30, 2011

The economy's problem? It ain't uncertainty

Another set of data also calls into question the “regulatory uncertainty” argument. If firms were nervous about hiring new employees but had immediate profitable sales opportunities (say, before new regulations are established), then they could readily increase the weekly work hours of current employees to produce more goods and services. The Center for Economic and Policy Research’s Dean Baker  (2011) and EPI’s Heidi Shierholz frequently point out that weekly hours are still far below their pre-recession level. Figure C depicts recent analysis by Shierholz (2011) of hours data through August 2011. It shows that weekly work hours for private-sector workers averaged 34.6 in 2007 but had fallen to 33.7 by June 2009 (the start of the recovery). Since then, weekly hours have recovered about half that loss and were at 34.2 in August. If employers restored working hours to their pre-recession level, that would be the equivalent of adding 1.2 million jobs, suggesting that a lot more staffing is readily available (without making permanent new hires) to produce output of goods and services if employers so desired. It is hard to believe that regulatory uncertainty is what is preventing employers from adding work hours to current employees to fulfill current profitable opportunities to sell goods or services. Something else must be going on: Customers and sales opportunities are simply not there.

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