Atlanta Fed's Lockhart Discusses Business Feedback on the Labor Market
Uncertainty about the cost implications of some government policies is keeping many southeastern businesses from hiring, said Atlanta Fed President Dennis Lockhart in a Nov. 11, 2010, speech in Atlanta.
Speaking at the inaugural conference of the Atlanta Fed's Center for Human Capital Studies (CHCS), Lockhart explained how anecdotal information from business contacts throughout the Southeast helps shape the Atlanta Fed's outlook for the economy and the labor market. The conference was titled "Employment and the Business Cycle."
What's normal, and what's not
Organizations are usually unsure about future revenue growth and cautious about expanding their payrolls coming out of a recession, noted Lockhart. However, for businesses to be uncertain about other factors—such as government policies, the new health care law, and the fate of the Bush-era tax cuts—is less normal and creates an obstacle to hiring. "The restraining effects of policy uncertainties are repeated frequently and with great vehemence," Lockhart noted. "In my opinion, a first priority is that government authorities bring clarity to matters central to business planning."
How long will firms "do more with less"?
The feedback from the Atlanta Fed's regional sources provides important insight into other aspects of the labor market, too. For instance, many contacts have emerged from the recession with leaner staffing and increased productivity. But they offer conflicting views on whether this downsizing will be permanent or temporary. Business leaders say they will continue to "do more with less," while also recognizing the limits to some efficiency gains, noted Lockhart. "On balance, a return to a prerecession configuration of a firm's labor force appears unlikely," he noted.
Additional feedback from the Atlanta Fed's business contacts:
- Some contacts are concerned about the amount of time workers have been unemployed and what it may say about their personal productivity. Meanwhile, others understand the unprecedented situation facing many unemployed workers.
- Overall, contacts expressed strong demand for hires with flexible skills who can adjust to varying workloads.
- Contacts commonly report that they are focused on pursuing a more flexible workforce in order to make labor a variable rather than a fixed cost. It's unclear whether this trend is permanent.
The CHCS works to understand of human capital development and labor market issues. The center's broad focus is on the interaction between labor markets and the health and education sectors and the human capital development and workforce policies that affect them.
November 30, 2010