Are businesses not hiring to the degree needed to lower the jobless rate because of doubts over Washington's fiscal policies or because of weak consumer demand?
The answer to that question is important because it's at the heart of a knotty partisan debate in the nation's capital.
Republicans have claimed it's confusion created by Obama Administration policies on health care and taxes, for instance, that have kept many business owners and managers from expanding their workforces.
A new survey of economists by The Wall Street Journal contradicts that, however. It's actually not government policies giving business managers the jitters but relatively low consumer demand, most of the economists said.
An excerpt from a piece by Phil Izzo:
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."
In the survey, conducted July 8-13 and released Monday, 53 economists—not all of whom answer every question—were asked the main reason employers aren't hiring more readily. Of the 51 who responded to the question, 31 cited lack of demand (65%) and 14 (27%) cited uncertainty about government policy. The others said hiring overseas was more appealing.
Some executives echoed the survey's central finding.
This survey dovetails nicely with a piece by David Leonhardt in the New York Times over the weekend.
As Leonhardt points out, consumers are tapped out and are unlikely to play the role they have in the past of spurring the economy.
If you're looking for one overarching explanation for the still-terrible job market, it is this great consumer bust. Business executives are only rational to hold back on hiring if they do not know when their customers will fully return. Consumers, for their part, are coping with a sharp loss of wealth and an uncertain future (and many have discovered that they don't need to buy a new car or stove every few years). Both consumers and executives are easily frightened by the latest economic problem, be it rising gas prices or the debt-ceiling impasse.