Business Uncertainty And Slow Job Growth

Dean Baker is highly skilled at using data to answer economic questions.  Many argue that slow job growth is due to uncertainty in the business community.  Those who favor this conclusion can point to a number of factors that might be responsible for business uncertainty.  Republicans like to blame it on the fear of higher taxes and excessive regulation of business. They usually restrict this critique to periods when Democrats are in office.

Businesses always face demand uncertainty.  They can deal with this by increasing or decreasing the number of hours worked, or by hiring and firing workers in response to demand changes.  It is more costly to hire and fire workers than it is to change the number of hours worked.  The data show that the number of hours worked has been dropping.  Businesses faced with declining demand have cut back on the hours needed to satisfy the observed demand.  The slow growth in jobs is the result of slow growth in demand.  It has little to do with other forms of uncertainty.