With the U.S. economy experiencing sluggish growth coupled with an 8.2 percent unemployment rate, Federal Reserve officials are moving closer to taking new steps to spur activity and hiring.
The Fed’s latest Flow of Funds report showed that U.S. nonfinancial companies held $1.7 trillion in liquid assets at the end of March. But the question arises, why aren’t these funds being used to create jobs? University of South Carolina research economist Dr. Joseph Von Nessen says, although the economy showed signs of growth in the first quarter of the year, consumer confidence is still down and that makes businesses apprehensive about expanding.
“Labor costs are the single highest costs for businesses and so they don’t want to make that investment and hire additional workers and expand with that capital that they have until they are reasonably confident that six, nine, 12 months down the road they’re still going to be demand for their product or service,” he told South Carolina Radio Network.
South Carolina’s jobless rate rose from 9.1 to 9.4 percent from May to June.
According to a recent report published by the Wall Street Journal, more and more companies are “reshoring” parts of their operations, bringing a steady trickle of jobs from Chinese plants to American ones. A recent survey of 105 companies found that 39 percent were considering moving some jobs back to the U.S.
However, Von Nessen says that doesn’t mean that we should be looking for a massive movement of employment opportunities back stateside. “They’re weighing a cost-benefit analysis and they are looking to basically make good decisions and to the extent that if costs are cheaper versus more expensive overseas versus here (in the U.S.) that’s really going to allocate where jobs go.”
World market observers say, with the dollar dropping and Asian wages and shipping costs rising, more American companies believe that moving jobs back to the states is a sound fiscal move.
Von Nessen says whether businesses begin to expand and create more job opportunities or continue to stand pat depends in large measure on what decisions are made on economic policy and that would depend on if the gridlock in Washington can be broken. “Depending on what policies we see coming out of Washington that may change incentive schemes you might see some changes, but I think like everybody else, businesses are responding to incentives, and so there is still a lot of uncertainly about what’s coming over the next year or so.”