The Business of Creating Jobs

by Denny Strigl

With the unemployment rate at 9.1% and real unemployment hovering around 20% we are hearing a lot lately about the need to “create” jobs.  I suspect the people who use the term “create jobs” never really worked in the private sector.  Managers know jobs can’t just be simply “created.”  The only reason to hire someone is because there is a need to get a specific job done.   It’s very obvious for those of us in the business world that you can’t simply “create” a job without a very specific reason.  Jobs are created out of necessity – work needs to be done.

When work needs done it is because there is a demand for a company’s products and services.  The very problem we are experiencing today in many companies across the U.S. and Europe is that there is less demand for products and services than there was previously.  The direct result of less demand is that many companies require fewer employees. Therefore, they are shedding jobs either through attrition or in many cases through forced termination of employees.

The problem then, is less demand for what many companies produce.  How do we go about “creating” demand for our products?  As we all learned in business school companies first  have to produce products which consumers, or other businesses, need or want.  In general what is happening in today’s economic climate is that consumers don’t need or want as much from many companies as they once did.  Why?  Frankly, I believe the  priorities of consumers have shifted because of the poor economy we are experiencing.  Case in point: people have seen their two biggest assets; their 401K plans and the value their homes significantly depreciate over the last couple years.  In addition, they have very likely seen family members and friends lose jobs.  Naturally, they wonder if they might be next to get laid-off.  Bottom line:  their priority is now to spend less and save more – to save as much as they possibly can.  This is exactly why the savings rate in the U.S. is at the highest level it has been for the last several years.

There is one more point I feel compelled to make.  The uncertainty surrounding what might happen next to the economy has caused spending of consumers and businesses to slow substantially.  Businesses, like consumers, are worried about what happens next to their revenues, costs and profitability.  So what do businesses do?  They save and they pay down debt.  As we all know business savings comes in many forms, but because one of the largest expense lines for most businesses in payroll and benefits, payroll and benefits is precisely what gets cut.

When I say businesses are concerned about what might happen next, I’d like to be very specific.  Business leaders are concerned about new taxes, costs associated with the new healthcare law and more costly regulations coming out of Washington and state governments.

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