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Creating Jobs in the Volunteer State: Why Are Employers Reluctant to Hire?

December 2, 2011 at 12:00 AM EST
Republicans have been saying that businesses aren't hiring because of uncertainty about regulation, the cost of health insurance and the cost of borrowing money. As part of his reporting on Making Sen$e of financial news, Paul Solman traveled to Tennessee to see if companies are creating more paying jobs in the Volunteer State.
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JIM LEHRER: Today’s jobs report underscored again that hiring remains far short of what’s needed.

The NewsHour’s economics correspondent, Paul Solman, has been asking employers why they are reluctant to bring on more employees.

And here is his report from Tennessee, part of his reporting on Making Sense of financial news.

PAUL SOLMAN: Nashville, Tenn., a red state’s blue city, with a better-than-average economy, a good spot, we thought, to ask employers, how come you’re not hiring more people?

BOBBY JOSLIN, Joslin and Son Signs: We can’t afford to hire anybody. It’s costing us a fortune to stay — to try to stay in business.

PAUL SOLMAN: For 34 years, Bobby Joslin’s been making signs, from paper to neon. He’s become a Nashville fixture.

(SINGING)

But Joslin Sign is struggling because of uncertainty, says Joslin, about federal policy, regulations, for instance.

BOBBY JOSLIN: We’re fighting mandates that just keep coming at us at nowhere.

PAUL SOLMAN: Mandates? You’re a sign company. What kind of mandates are you facing?

BOBBY JOSLIN: Well, two years ago, three years ago, we had to have all our tow motor people certified to operate a tow motor.

PAUL SOLMAN: A tow — a what?

BOBBY JOSLIN: A forklift.

PAUL SOLMAN: Oh, OK.

BOBBY JOSLIN: And that cost the company $3,600. Now we’re having to dispose of all our lightbulbs. We’re in the sign business. We create a lot of volume of fluorescent tubes. So we just got through spending $8,500 on a lightbulb crusher.

PAUL SOLMAN: And then there’s the new health care law.

BOBBY JOSLIN: For instance, the Obamacare, when we bring on a new employee, we don’t know what that employee truly is going to cost us in 2014. And we’re not in the practice of hiring people and then laying them off.

PAUL SOLMAN: Uncertainty of taxes and regulation crippling job creation, it’s become a Republican talking point.

REP. TIM GRIFFIN, R-Ark.: Uncertainty is the number-one obstacle to job creation in this country, uncertainty.

REP. ERIC CANTOR, R-Va., House majority leader: This uncertainty prevents entrepreneurs from taking a risk, from starting a business, and from creating jobs.

SEN. ORRIN HATCH, R-Utah: The onerous regulations and regulatory uncertainty are acting to cast a wet blanket on job creation in America.

PAUL SOLMAN: Is it too much to suggest that, if you knew that the Republicans were going to take over the White House and the Senate, you would be more reassured and therefore more likely to hire?

BOBBY JOSLIN: Absolutely, because the policy of the Republican Party is less government in our lives. We can create jobs when the government stays off of our back. It’s that simple.

PAUL SOLMAN: Or is it that simple? Joslin told us business is down 35 percent over the past three years.

So, then, lack of demand is the other reason you’re not hiring, right?

BOBBY JOSLIN: Well, absolutely. Sales drive everything. Sales drives us to hire people, or they force us to make cutbacks.

PAUL SOLMAN: But if sales drive everything, how important can policy uncertainty be?

At nearby Vanderbilt University, economist Peter Rousseau:

PETER ROUSSEAU, Vanderbilt University: I don’t think that uncertainty in the government policy environment should be readily dismissed, but I think that we really need to think of these factors as more second-order compared to the deeper fundamental which is going on, which is just basic demand.

What’s happened to the consumer? Their house value has fallen by 35 percent or more since the — since the recession. They are faced with a mountain of consumer debt, which they’re trying to pay down at this point. And so, of course, this is all going to translate into a reluctance to engage in nonessential purchases.

PAUL SOLMAN: And everywhere else we went in Nashville, businesses pretty much agreed the overriding uncertainty is about demand.

Why, for example, is David Stansell not hiring?

DAVID STANSELL, Stansell Electric Company: We’re not certain about the availability of work. That’s why.

PAUL SOLMAN: Stansell runs an electrical contracting company tied to the construction industry. His third-generation family firm supported 200 employees, is now down to 133.

DAVID STANSELL: The work is not available, or not as much work available as we could do.

PAUL SOLMAN: Given that Nashville unemployment is below the national average, some firms are thriving and actually hiring.

Linus Hall started Yazoo Brewing eight years ago, and business has been hopping right through the recession.

LINUS HALL, Yazoo Brewing: It seems, in good times or bad, people like to drink beer, and it hasn’t seemed to have affected us much at all.

PAUL SOLMAN: As for premium Yazoo:

LINUS HALL: I think good beer is like an affordable luxury.

PAUL SOLMAN: Hall has 12 employees, up from 10 last year.

LINUS HALL: We think our business will continue to grow next year, so probably around the middle of the year, we anticipate having to hire a couple extra people.

PAUL SOLMAN: But doesn’t policy uncertainty make him at least a little reluctant?

LINUS HALL: No. I mean, if we had to scale back, we could, but right now, we’re seeing a lot of demand, and we’re just trying to keep up with that.

PAUL SOLMAN: Old Hickory Bat Company is another small Nashville firm.

How’s business?

TRAVIS COPLEY, Old Hickory Bat Company: Business is great.

PAUL SOLMAN: V.P. Travis Copley, who played baseball in the minors.

So you will be hiring?

TRAVIS COPLEY: That is the plan right now, yes, sir.

PAUL SOLMAN: And you don’t worry about who the next president is going to be, whether the Republicans take over the Senate? That’s not going to affect your plans?

TRAVIS COPLEY: We’re not going to shut down business for the next two years to see who gets elected and see what changes they make. And I would venture a guess that most people are going to take that approach.

You’re not going to stall your business out waiting to see what the politicians in Washington do. You do everything within your power to keep the demand high to generate business.

PAUL SOLMAN: So, the brewer and the bat maker both say it’s demand that drives their hiring decisions, not uncertainty about the shape of things to come from Washington.

But banker Jim Gardner says that, for his customers, at least, the political process is always lurking in the background.

JIM GARDNER, Renasant Bank: My experience in banking is that clients typically do not like election years, because conversations about taxes, increased regulation all gets ratcheted up, and that creates the perception of more uncertainty.

PAUL SOLMAN: And that’s why the money then stays on the sideline.

JIM GARDNER: And it stays on the sideline. So, we have a lot of clients with large deposit account balances and nothing, or next to nothing, drawn on operating lines of credit.

PAUL SOLMAN: So which is the key factor, uncertainty over policy or over future demand?

JIM GARDNER: I’m going to disappoint you with an answer and say that I’m seeing that it’s a little bit of both.

PAUL SOLMAN: One more Nashville venue, the consulting offices of Republican hero Arthur Laffer, Ronald Reagan’s prophet of supply-side economics. We figured he too would lend support to the uncertainty principle, but:

ART LAFFER, former White House economic adviser: Uncertainty is not the problem. The problem is the prospects for lower returns in the future. That’s the problem. And when you look at this economy, you know, it’s a reasonable problem. It really is.

PAUL SOLMAN: Of course, if Laffer were certain that policy would change in his direction, of lower taxes on the wealthy, say:

ART LAFFER: I would be willing to bet you a nickel that, if you lower the tax rates, you will create an investment environment that they will invest more than they otherwise would have invested.

PAUL SOLMAN: Lastly, Pulitzer Prize Winner David Cay Johnston, one of the country’s foremost economic reporters, with a speciality in taxes. He isn’t in Tennessee, but at Reuters in New York.

A businessman himself — he owns a small family firm managing a hotel — Johnston too emphasizes the primacy of demand.

DAVID CAY JOHNSTON, Reuters: I need more customers, especially ones who can pay higher prices, and then I will hire more workers.

And every businessman I know says exactly that. Non-financial companies are sitting on over $3 trillion of cash, the latest IRS data shows. Companies are not investing that money because there’s no demand. It’s not because they’re concerned that tax rates may go up or regulations may change. They need to have people and businesses with money to spend in order to invest.

PAUL SOLMAN: In Nashville, though, Bobby Joslin insists policy uncertainty is holding back his investment.

BOBBY JOSLIN: We need to replace a couple expensive cranes. We’re not going to do it because we don’t know what the tax structure is going to be this time next year on our capital expenditure. We’re holding off on that.

PAUL SOLMAN: And if you knew that taxes were going to be lower on capital expenditures next year, you would buy the cranes now?

BOBBY JOSLIN: In a New York minute. We would order the crane. We would order our cranes right now.

PAUL SOLMAN: To which Old Hickory Bat’s Travis Copley counters:

TRAVIS COPLEY: If it makes sense, you do it, regardless of what’s going on in Washington at the time.

PAUL SOLMAN: And going on, it will be, for another year, at the very least.