“Uncertainty” Not Holding Back Hiring

Dean BakerDean Baker is back with another one of those great snarky headlines, Is Uncertainty Delaying Hiring or Is This Just Another Make Work Project for People Who Write About the Economy? This is the ultimate zombie idea: it has been killed countless times but just keeps shambling on. Apparently, it is back.

Over at the Washington Post, Catherine Rampell has noticed that there are more job postings but still companies are not increasing their hiring. She thinks this must mean that the companies know they need more workers, but they just can’t bring themselves to hire because of “uncertainty.” Who knows? Tomorrow, Obama may nationalize every business in America. Then where would they be? Seriously though, no one is ever clear as to what these companies are more uncertain about now than they ever are.

Dean Baker, of course, is addicted to simple math and he showed that even now, employee turnover is high enough that even if an employer were wrong to hire an employee, within a few months another employee would quit or be fired and so the new hire would be needed. Every six months, almost 20% of all employees leaves a job for one reason or another. What’s more, if this “uncertainty” claim were true, it would be apparent because companies would be working their existing employees more hours. And they aren’t.

So why are there more job listings even though there really are no more jobs? Bake explained:

Listing is cheap. In a weak labor market there are more potential good hires out there than would be the case in a strong labor market. This means that there is likely to be a greater return to having a greater search effort. In a strong economy and strong labor market an employer might face a substantial cost for delaying a hire, since they need to fill a position and their business will suffer from having a vacancy sit open. Furthermore, there is little likelihood that if they let an acceptable worker get away that the employer will find a better worker later.

In other words, the labor market is slack, so employers know that they can always get acceptable workers on a moments notice. This would not be true in a tight labor market. So they list jobs, hoping that they can find a really great employee at a really great price. Meanwhile, the fact remains: there is low demand in the economy. Businesses are not hiring because businesses do not need to be hiring. None of this is difficult to understand, but I’m not in favor of firing economics writers. A make work program is a very good thing right now. We could use a lot more of them in other fields that actually matter.

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About Frank Moraes

Frank Moraes is a freelance writer and editor online and in print. He is educated as a scientist with a PhD in Atmospheric Physics. He has worked in climate science, remote sensing, throughout the computer industry, and as a college physics instructor. Find out more at About Frank Moraes.

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