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Monday, July 18, 2011

Uncertainty? No. Lack of demand? Yes.

Echoing a point made some time ago: businesses aren't hiring because demand is lacking:

"The main reason U.S. companies are reluctant to step up hiring is scant demand, rather than uncertainty over government policies, according to a majority of economists in a new Wall Street Journal survey.
"'There is no demand,' said Paul Ashworth of Capital Economics. 'Businesses aren't confident enough, and the longer this goes on the harder it is to convince them that they should be.'"

This chart illustrates the problem. It comes from the latest report (PDF) from the NFIB:

(click to enlarge)
 

While the gap has narrowed, the most important problem for the businesses surveyed is poor sales at 24%, followed by taxes at 20% and government regulations and red tape at 15%.

It's important to note that there may be a silver lining in this cloud: one year ago, poor sales was at 30%, while taxes and red tape remained unchanged.

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