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Job Growth Stalls as Economic Outlook Remains Murky

January 8, 2010 at 12:00 AM EDT
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The unemployment rate held steady at 10 percent in December, according to new figures released Friday. As part of his continuing series of reports on making sense of the economy, Paul Solman travels to Atlanta to gauge the hiring outlook in a down economy.
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JIM LEHRER: Now: our second jobs story, a closer look at why hiring is going so slowly, as seen through the lens of small business.

“NewsHour” economics correspondent Paul Solman has our report. It’s part of his ongoing reporting series Making Sense of financial news.

STEVE GUY, CEO, Entertainment Design Group: It’s a little guy that went in a store and more carousel horses, and…

PAUL SOLMAN: Steve Guy, CEO of Entertainment Design Group in Atlanta, where the economy still looks as scary as some of the props they manufacture here.

STEVE GUY: That’s a mannequin we put there. We have laid off so many people, that it gets a little lonely around here.

PAUL SOLMAN: So, how many people did you have here at the peak?

STEVE GUY: About 75 full-time and about 300 part-time.

PAUL SOLMAN: Really? And what are you down to at the moment?

STEVE GUY: Right now, were down to 42 full-time and around 100 seasonal.

PAUL SOLMAN: Guy’s company sells everything from shopping mall holiday displays to theme park attractions. It produces Atlanta’s annual tree lighting ceremony and the dropping of the sweet Georgia icon that marks the local New Year’s celebration.

And, yet, the hiring situation is, if you will excuse the expression, not so much peachy as in the pits.

STEVE GUY: Big corporations are not building new buildings. Theme parks are not building new rides. And, with that, we’re sort of just stuck, like a boat stuck on a sand barge. So, for now, there’s absolutely no reason to hire anybody full-time, because I don’t want to have to hire somebody and just come back and have to let them go again.

PAUL SOLMAN: The company, clearly quirky, but perhaps characteristic of small business in America these days, is down 30 percent year over year.

But Steve Guy considers himself a survivor. When times were better, he bought this machine, which uses super-high-pressure water and sand made of garnets to cut through just about anything.

STEVE GUY: But the company Calypso that manufactured the machine has actually gone bankrupt in this recession.

PAUL SOLMAN: And what is that?

STEVE GUY: That is a portal that we were building for an entertainment center called Belle Island in Pigeon Forge. And that particular facility also went bankrupt.

PAUL SOLMAN: Batman.

STEVE GUY: Yes, we manufacture those for Six Flags theme parks, which is also in Chapter 11, and we’re hoping for their emergence as soon as possible.

PAUL SOLMAN: In Atlanta’s Midtown hotel complex, at this week’s annual economists convention, the view from well above the fray.

The pros who track and analyze unemployment assemble here, and they see a job market that may finally be near the bottom. But, even so, over the past two years, laments former Clinton Labor Department economist Larry Katz:

LARRY KATZ, Harvard University: We have lost eight million jobs. We needed 2.5 million jobs just to keep up with population growth. So, we’re about 10.5 million jobs in the hole. Even if, say, over the next four years, we were generating jobs at the pace of the sort of late ’90s boom under Clinton, we would be continuing to have incredibly high unemployment for the next four or five years.

PAUL SOLMAN: Indeed, it would take a burst of new jobs in the next four to five years, 15 million or more, just to get us back to where we were at the start of the great recession. Yet, December recorded another net loss.

Economic forecaster Allen Sinai spoke for many.

ALLEN SINAI, Decision Economics: We will get positive jobs creation in the next month or two, and we will have a surge in jobs when census workers come to work. But, beneath that, the underlying growth of jobs in this country looks to me to be very anemic, another kind of jobless recovery, like or worse the ones we had before.

PAUL SOLMAN: So, are you imagining a steady state for the American economy with unemployment 8 percent, 9 percent, 10 percent?

STEVE GUY: It’s probably peaked at about 10 percent, but we won’t see 8 percent at least until 2012.

PAUL KRUGMAN, The New York Times: This is still one hell of a depressed economy.

PAUL SOLMAN: Paul Krugman is typically pessimistic as well.

PAUL KRUGMAN: Who’s going to want to expand? Who’s going to want to build an office building, when we have got record vacancy rates? Who’s going to want to build a factory, when we have got near record excess capacity in industry, and down the line? So, why would you expect hiring in this environment?

PAUL SOLMAN: Now, there were economists here who saw light at the end of the tunnel.

Northwestern’s Robert Gordon:

ROBERT GORDON, Northwestern University: There’s reason to hope that unemployment is going to come down substantially in 2010. First, all the outlook for GDP, the total amount of production, is for it to increase about twice as fast as it did back in 2002, during the previous recovery. The second reason is that we can’t produce more with ever fewer people unless we have a gigantic boom in productivity.

PAUL SOLMAN: Meaning more output per person. Suddenly, we were just much more efficient.

ROBERT GORDON: Productivity always grows rapidly at the beginning of the recovery, because firms are still cutting costs as output recovers. And, eventually, they realize, ah, output is recovering. Let’s rehire some of these folks.

PAUL SOLMAN: But, back at Steve Guy’s company, instead of rehiring, they’re working people harder.

Holly Robbins used to be in charge of accounts payable. She still is.

HOLLY ROBBINS, Entertainment Design Group: I still do all of the accounts payable, and the bills, and opening the mail, and making sure everything that we pay for is accurate and approved, and get everything entered, so we get them paid on time.

PAUL SOLMAN: But she also now does shipping and receiving.

So, are you working harder than you did before?

HOLLY ROBBINS: Seems like it. Sometimes, it’s pretty crazy.

PAUL SOLMAN: And, even if the economy really picks up, says the boss, he probably won’t reduce the increased load on the workers who remain.

STEVE GUY: It’s a fundamental change in how I manage my business, where, for years, bigger was better. I had growth every year. Now I’m pretty happy where I’m at.

This could be the best year we have ever had. We have done so many proposals that are out there that, if only a few of them take off, we’re going to be covered up. But, at the same time, that doesn’t mean I’m going to hire full-time employees. And there’s not a CEO I know that’s hiring right now.

PAUL SOLMAN: Now, Steve Guy is, well, just one guy, and EDG is just one company. But, if it’s a typical of small businesses, perhaps we shouldn’t expect them to rescue the American economy with new jobs anytime soon.

You’re part of a group of regional CEOs. If the economy picks up dramatically, will they begin to hire again full-time?

STEVE GUY: I think they will look for every avenue possible not to hire full-time, meaning they will hire temporaries, contractors, and so on. I think they will think about it a long time before they hire full-time people.

PAUL SOLMAN: And today’s numbers bore out Guy’s scary take on the labor market: 85,000 more jobs lost last month, plus nearly a million more Americans no longer counted as even looking for work.

The only glimmer of good news? More temporary jobs, giving hope that the job market could take off at some point.