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Correcting Our Unemployment Problem Demands Tough Leadership

March 15th, 2009

The question on everyone’s mind these days from President Obama to financial talking heads on cable news channels, and especially down to every citizen in this nation, is what is it going to take to strike a fire under the hiring departments of domestic companies in this country? With each passing quarter, we hear new excuses for why new hiring is at a standstill, but we also learn that nearly $2 trillion is resting on the collective balance sheets of our country’s largest corporations, waiting for some signal to invest in capital equipment and projects that will ignite employment and attempt to gain the nearly nine million jobs that were lost over the previous decade.

The numbers are not up for debate. They have been clearly depicted in the infamous “bikini chart” that surfaced back in May of this year to illustrate that the loss rates suffered during the Bush administration had been reduced once President Obama took office, but that positive gains had been stagnated due to lack of attention by Corporate America. The cute named associated with the chart was due to the resemblance of the first half of the chart to the bottom of a popular piece of women’s swimwear.

The Great Recession, as it has now been named, had ended according to government definitional rules, but the recovery of jobs has yet to kick into gear. Corporate CEOs have quipped that domestic hiring plans are on hold for a variety of reasons, but that projects in Asia, where growth is assured, are proceeding at an increased pace. Foreign exchange trading has also filled the coffers of forex brokers in the region. The prosperity in these markets has been building for two decades due to a tsunami of outsourcing activities, more appropriately described as off-shoring, that have shipped millions of middle-class, high-paying jobs overseas.

Recovering these jobs on home shores will not be easy. Corporate cost cutting has been rampant, especially following the recessionary dip in 2008. Cost cutting in today’s parlance translates to moving labor-intensive jobs here to destinations where the standard of living is much lower, enough to cover transportation and administration costs and also leave room for profit margins. Domestic corporations are lean and mean today. Quarterly profits continue to meet or exceed expectations, dividend payouts are plentiful, and shareholders, along with corporate executives in receipt of hefty bonuses, are quite content with current events. American taxpayers struggling to cover monthly expenses and out of work are definitely not among the contented lot.

The reasons for shallow hiring plans are varied:

  1. The American consumer is not buying anything;
  2. The housing industry is in disrepair and will take a decade to recover;
  3. Banks refuse to loan money to small and medium sized companies;
  4. The wealthy need the certainty of tax cuts to risk hiring again;
  5. The threat of government regulation has handcuffed executives, and
  6. The outcome of November elections is in doubt.

The American consumer is not buying anything because per-capita disposable income has actually declined over the past decade. A relevant study on this topic states that the top 1% of income earners enjoyed 8.9% of our national gross income in 1976, but this share has grown to 23.5% in 2007. During theses same two decades, the average hourly wage, adjusted for inflation, has dropped by more than 7%. November elections have passed, and no new hiring plans are on the table.

Greenwich Associates, a global research firm, recently released a new study. Their research reveals that the hiring conundrum is due to the economy and not to bankers withholding credit from small and medium sized firms. This reason seems to have a circular nature about it without contributing much.

When times are tough, tough leadership is always the cure. America must get tough on trade and reduce off-shoring activities. Jobs are at stake.

This article on foreign exchange trading was supplied by Tom Cleveland from ForexFraud.com.

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