Just a reminder: Capital is sitting on the sidelines because of …

posted at 2:21 pm on June 4, 2012 by Ed Morrissey

Actually, this AP report might be out of date, and not just because it ran on Saturday, the slowest news day of the week.  Their lead paragraph states, “Business has picked up,” but that’s no longer true.  Business growth has declined since 2011Q4′s 3.0% annualized GDP growth rate, tumbling to 1.9% in Q1, with manufacturing hitting three-year lows in two of the three months.  But to the extent that business had grown, employment hadn’t followed.  Why?

The economy seems so gripped by uncertainties that many employers have decided to manage with the staff they have. They aren’t convinced their customer demand will keep growing. Or they worry that Europe’s festering debt crisis could infect the global economy. Or they aren’t sure what Congress will do, if anything, about taxes and spending in coming months.

All that helps explain why U.S. employers added just 69,000 jobs in May, the fewest in a year and the third straight month of weak job growth.

“If you’re anxious, you sit on your hands,” said Chad Moutray, chief economist at the National Association of Manufacturers. …

Companies also complain that changes in environmental regulations and business subsidies are too hard to predict and plan for.

Much of the problem stems from regulatory adventurism, and the ambiguous manner in which the regulatory state has expanded.  Businesses cannot plan for largely-unwritten regulations stemming from ObamaCare and Dodd-Frank, two bills which Democrats passed that provided a shell of authority for bureaucrats to issue massive amounts of regulation and rules.  No business can plan for growth without knowing the compliance costs for just the status quo, let alone any expansion.  The result is that businesses and investors are forced to shelter capital rather than put it to work until the ambiguities are resolved.

The AP analysis also relies heavily on reaction to “Taxmageddon,” the cliff approaching at the end of the year on tax rates and spending cuts at the federal level:

Jason Speer is nervously watching Congress and possible tax changes as Bush-era income tax cuts near expiration at year’s end. He’s a vice president of Quality Float Works of Schaumberg, Ill., which makes devices to monitor fluid levels in tanks.

Speer says he’d feel a lot better about hiring later this year if it weren’t for the uncertainty about federal taxes. Unable to anticipate his company’s costs, Speer says he can’t make decisions about growth and hiring.

“We don’t know if there’s something around the corner that’s going to hurt our business,” Speer says.

That’s one of the reasons why we’re heading into another Wreckovery Summer, but it’s hardly the only one.  After all, income tax hikes won’t impact income earned this year, and it would make sense to invest capital ahead of tax hikes in some cases (not all, especially for short-term income opportunities).  The sequestration cuts will impact defense contractors hard, but those effects will spill over to subcontractors and suppliers, as well as tertiary markets.  However, if the regulatory climate was reasonable and clear, investors would still look for non-defense opportunities for expansion to put capital to work, not to have it sitting on the sidelines and drawing a minimal amount of interest.

Over at The Fiscal Times, Suzanne McGee confirms that the “ugly” numbers from last week have capital investors looking for shelter from another Wreckovery Summer, although McGee puts more emphasis on the global slowdown:

The economic numbers released late last week were downright ugly. First-quarter GDP growth at 1.9 percent wasn’t quite as robust as everyone had assumed. Amere 69,000 jobs were created in May, the lowest level seen in the last year, and April’s job creation numbers were revised downward. The unemployment rate – which already understates the real level of unemployment by excluding those disappointed workers who are no longer searching for jobs – edged back up to 8.2 percent. And the weakness isn’t confined to one or two industries, but is seen across the board. Those people who still do have jobs are seeing their employers cut back on the number of hours they work – an early warning signal that those employers are worried about an actual or potential falloff in customer orders or demand.

Unsurprisingly, those unpleasant job numbers were the last straw for stock market investors, whose nerves were badly rattled throughout May by everything fromJPMorgan Chase’s (JPM) trading loss and the bungled Facebook (FB) IPO to the steady stream of bad news coming from Europe. The Dow Jones Industrial Average sank 275 points, or 2.22 percent, relinquishing what was left of its gains for the year. The index is now down 0.81 percent in 2012, while the S&P 500 remains up just 1.63 percent. The yield on 10-year Treasuries hit a record low below 1.5 percent. …

That may be an overly melodramatic view of the situation, but the truth is that we’re facing, for the first time, the downside of what it means to be part of a global economy. Up until now, it has been our own problems that have caused us to struggle economically and slip into recession – whether it’s irrational lending practices by banks or irrational exuberance with respect to fledgling dotcom companies’ growth prospects. We have tended to slip into recession first, and when we sneezed, the rest of the world came down with a cold or even pneumonia. Now, instead of the United States pulling the rest of the world into a recession, we are finding that we can’t immunize ourselves from problems in other parts of the world any more. We’re part of a global economy, and that global economy is struggling, too, perhaps even more than is the U.S. economy.

Take Brazil, for instance, which on Friday reported some very worrying economic numbers: The country’s GDP grew only 0.2 percent in the first quarter, not the 0.5 percent that economists had expected, despite a series of hefty interest rate cuts that began last summer. Industrial production there has stalled. India’s growth rate has been cut nearly in half as its manufacturing sector contracts. Even China is focused more on making sure its landing is a soft one that doesn’t ignite social and political strife than on fulfilling what some once imagined might be its role – to buoy the global economy when developed markets in North America and Europe stalled.

If the US wanted to take off the shackles, the easiest way to economic growth is to roll back the regulatory intrusions — perhaps especially on energy production — and demonstrate at least some progress on long-term fiscal and tax reform rather than another round of gimmickry.  So far, the Obama administration doesn’t even seem inclined to try that approach, and so we’ll wind up with our third consecutive lost spring and summer.


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This isn’t what Obama wants to hear, so of course he won’t.

The man has a titanium skull. Impervious to new information.

The guy’s locked in the 1960′s and he’s not coming out for no one.

NoDonkey on June 4, 2012 at 2:24 PM

So far, the Obama administration doesn’t even seem inclined to try that approach, and so we’ll wind up with our third consecutive lost spring and summer.

Yup. Things are looking grim.

dogsoldier on June 4, 2012 at 2:25 PM

“Racists” –sesquipedalian, Uppereastside, lester, ernesto and assorted fools in most of the media

Schadenfreude on June 4, 2012 at 2:26 PM

That’s it. Bye-bye stock market, hello Vegas!

:P

Ladysmith CulchaVulcha on June 4, 2012 at 2:27 PM

Friday shot the 1996 scenario inot oblivion.

Schadenfreude on June 4, 2012 at 2:28 PM

Business growth has declined since 2011Q4′s 3.0% annualized GDP growth rate, tumbling to 1.9% in Q1, with manufacturing hitting three-year lows in two of the three months. But to the extent that business had grown, employment hadn’t followed. Why?

Seriously, how complicated is this?

Business is NOT growing.

Subtract two percent from GDP “growth” to account for the REAL inflation rate — including food and fuel — and the economy has been at a dead stall for three years now.

And if you want to figure out the “giant mystery” of unemployment, remember to subtract ANOTHER two percent to account for the per capita GDP.

Newsflash: The Recovery is not “slow.” There is NO recovery going on AT ALL! The economy is SINKING into an endless abyss. (And, btw, in case you still haven’t figured it out: that is not a good thing.)

logis on June 4, 2012 at 2:31 PM

Obama: Let’s give everybody $3,000 to buy furnace thingamajigs!

It will only cost $0.93 trillion!

Steve Z on June 4, 2012 at 2:34 PM

…it’s Bushes fault…it’s the European’s fault…it’s the Congress’s fault…it’s…..fault…..fault…….fault……fault…….fault…..fault…..fault….

KOOLAID2 on June 4, 2012 at 2:35 PM

Anyone in the private sector who is not a government contractor or being propped up by bogus government slush fund money would tell you this.

Nothing has changed since 08.

CorporatePiggy on June 4, 2012 at 2:37 PM

This isn’t what Obama wants to hear, so of course he won’t.

The man has a titanium Titanic skull. Impervious to new information and that sinking feeling.

D@mn the icebergs–full speed ahead! Buy thingamajigs!!!

Steve Z on June 4, 2012 at 2:39 PM

Jay Carney defends Obama, blames republicans.

fogw on June 4, 2012 at 2:38 PM

In other breaking news, the sun rose this morning.

NoDonkey on June 4, 2012 at 2:39 PM

These dems either have no clue and won’t admit it or are intentionally tanking us and won’t admit it. It’s hard to see it any other way and if a regular schmoe like me can see it it has already caught on everywhere.

And I was so looking forward to a fun summer.

DanMan on June 4, 2012 at 2:45 PM

So employers are reaping profits, not hiring people and then bad employment numbers scare investors. This is Obama’s fault how?

libfreeordie on June 4, 2012 at 2:47 PM

If anything, hiring is going to come to a halt in the next 5 months. If you’ve waited 40 months for signs of life, what’s a few more?

One simple, cheap way to unleash this economy: radical tax reform. If November is good to Republicans and they don’t make this a top priority, I’m done with them for good.

stout77 on June 4, 2012 at 2:48 PM

When Romney wins and puts an end to Obama’s anti-business policies, businesses will start spending their money again, and the economy will improve.

The MSM narrative will be that businesses didn’t want to spend their money while a Black man was POTUS. So an improving post-Obama economy will serve as proof of how racist America is…….Brian Williams (May 2013): “Yes, we’re starting to see some significant economic growth, but what does it say about our country for businesses to have waited until the Black man was shown out through the back door before unleashing all the capital that they had stored over the previous four years? Is this something we should be proud of. I think we need to do some deep, deep soul searching”.

ardenenoch on June 4, 2012 at 2:51 PM

So employers are reaping profits, not hiring people and then bad employment numbers scare investors. This is Obama’s fault how?

libfreeordie on June 4, 2012 at 2:47 PM

Fault? He seems to be okay with it. It’s our reality. Are you happy with the way things are going libfree? if not, why not? if so, why so?

DanMan on June 4, 2012 at 2:53 PM

So employers are reaping profits, not hiring people and then bad employment numbers scare investors. This is Obama’s fault how?

libfreeordie on June 4, 2012 at 2:47 PM

If Obama personally punched you in the face you would find a way to blame anyone but him, so what’s the point?

stout77 on June 4, 2012 at 2:53 PM

This situation perfectly illustrates Obama’s abysmal ingorance about economics. He has no curiosity about it, he has no true private sector business experience, and he will never, never, NEVER change his approach. Sometimes this seems to me like a weird kind of mental paralysis. Or maybe it has more to do with the fact that he’d have to (at least tacitly) admit that he made a mistake.

Even if someone showed him a graph of US Treasury Receipts during the George W. Bush years showing an increase in receipts in the years following the “deficit causing” Bush tax cuts, he’d still say that fairness is more important. Obama is absolutely impervious to reality.

Fafhrd on June 4, 2012 at 2:55 PM

One simple, cheap way to unleash this economy: radical tax reform. If November is good to Republicans and they don’t make this a top priority, I’m done with them for good.

stout77 on June 4, 2012 at 2:48 PM

Much good it will do when half the population – most of them Obama voters, of course – doesn’t pay any taxes.

Archivarix on June 4, 2012 at 2:55 PM

So employers are reaping profits, not hiring people and then bad employment numbers scare investors. This is Obama’s fault how?

libfreeordie on June 4, 2012 at 2:47 PM

That’s easy. Obama’s policies and regulations are making employers tighten their belts and won’t overextend for fear of higher taxes/obamacare.
You see, these guys want to save ther businesses despite Obama. Obama has never worked one day in the private sector and hence, has no clue. Just like everything else, Dummy.

AllahsNippleHair on June 4, 2012 at 2:56 PM

So employers are reaping profits, not hiring people and then bad employment numbers scare investors. This is Obama’s fault how?

libfreeordie on June 4, 2012 at 2:47 PM

It’s right there: “Businesses cannot plan for largely-unwritten regulations stemming from ObamaCare and Dodd-Frank, two bills which Democrats passed that provided a shell of authority for bureaucrats to issue massive amounts of regulation and rules.”

Obama spent two years passing jobs-killing legislation and the last year and a half whining and campaigning.

Obama is not the solution, Obama is the problem.

NoDonkey on June 4, 2012 at 2:57 PM

ardenenoch on June 4, 2012 at 2:51 PM

Good call. Let’s just play along with their narrative for a couple of years to keep them on edge. And laugh at them when they think we’re not looking. Let’s add some paranoia to their unhinged mental profile.

DanMan on June 4, 2012 at 2:57 PM

There is absolutely no doubt that business is holding its breath right now waiting to see what 2H12 brings; Europe is a particularly dark cloud, and it is hard to imagine a scenario where US fiscal policy in 2013 will be anything but a drag on the economy. Regulations themselves are not usually worrisome: Businesses can adapt as long as they know the rules and they know the rules won’t be changing. The biggest problem right now is a lack of demand; no one is going to hire workers unless they have work for them to do, and right now businesses have enough workers to meet the current demand. This is not likely to change for the foreseeable future.

TouchdownBuddha on June 4, 2012 at 2:59 PM

libfreeordie on June 4, 2012 at 2:47 PM

Because he … oh, never mind.

Cleombrotus on June 4, 2012 at 2:59 PM

So employers are reaping profits, not hiring people and then bad employment numbers scare investors. This is Obama’s fault how?

libfreeordie on June 4, 2012 at 2:47 PM

The first troll got released by Axelturd…and proved instantly how devoid of logic they are. Don’t answer the question. I love it when they remain delusional.

Schadenfreude on June 4, 2012 at 3:00 PM

And people wonder why business owners in Puerto Rico are no longer favoring statehood! Who wants to shackle themselves to that endless Federal regulation and inability to decide anything, on top of our own endless regulation and chaos in government?

The last best hope of mankind has become a monster of muck trapped in its own poo. Wake up, people!

JoseQuinones on June 4, 2012 at 3:04 PM

Forget all the analysis.

The economy will improve when people are in government who don’t think “profit” is a dirty word, and “pro-business” an insult.

tbrosz on June 4, 2012 at 3:04 PM

As a small businessman, after paying for raw materials and salaries and such, presumably there is some remaining profit. The first 40% or so of that profit has to be paid to the government as taxes. After that, the remaining 60% can be used to reinvest in the business or hire new employees–growth initiatives.

Today we don’t know if that profit will be at the same level, because health care costs may rise due to Obamacare. Secondly, we don’t know if the tax rate will be 40%, 50%, or even more. Consequently small business is now saving all the extra profit in the expectation that it will be needed to pay more taxes next year. Thus, no hiring or other growth initiatives. Until there is some certainty of the future, don’t expect much else.

phillypolitics on June 4, 2012 at 3:05 PM

bayam?

Del Dolemonte on June 4, 2012 at 3:08 PM

So employers are reaping profits, not hiring people and then bad employment numbers scare investors. This is Obama’s fault how?

libfreeordie on June 4, 2012 at 2:47 PM

Reading comprehension just isn’t your thing, is it?

Employers are BARELY making profits. The insurance company I left 9 months ago was limping along on only a 2-3% margin for the last few years.

It is Obama’s fault because his administration has heaped loads of ambiguous risk on the economy… from Obamacare (how much will healthcare cost my company?) to environmental (how much will studies cost/delay my projects?) to taxes (will Democrats allow my taxes to increase, causing my company to post losses instead of profits?)… and on, and on, and on.

Since liberal Democrats took control of Congress in 2007 and the Presidency in 2009, their policies have been like a bull in a china shop. Not only has it destroyed huge amounts of potential capital, but no one is willing to go back into the shop until the bull is removed! It’s too unpredictable, destroys too much and will leave the risk taker gasping his last breaths on the shop floor after goring and trampling him. And Government promises of calling 911 don’t hold much weight from the people that unleashed the monster in the first place!

dominigan on June 4, 2012 at 3:08 PM

So employers are reaping profits, not hiring people and then bad employment numbers scare investors. This is Obama’s fault how?

libfreeordie on June 4, 2012 at 2:47 PM

If anyone else had written this, it would have come with its own sarc tag. But your moniker says it all.

Apparently you don’t subscribe to the cause and effect theory, but rather the Gumppian “shiite happens” theory.

VietVet_Dave on June 4, 2012 at 3:13 PM

We need a part time Congress. Much like unions a full time Congress has outlived its usefulness. Most of their time is spent either on utter nonsense or on expanding the state. Part time legislatures work well for many states, why not Congress?

So, how do we get to a part time Congress? Federalism.

Charlemagne on June 4, 2012 at 3:19 PM

So employers are reaping profits, not hiring people and then bad employment numbers scare investors. This is Obama’s fault how?

libfreeordie on June 4, 2012 at 2:47 PM

Companies don’t exist to hire people. Companies exist to make money. Employees are a result of making money. I just explained this simple concept to my teenaged son. He gets it.

Charlemagne on June 4, 2012 at 3:22 PM

libfreeordie on June 4, 2012 at 2:47 PM

Who runs the departments that have made all those regulations? Who appointed those department heads? If those department heads weren’t 4 square behind the regulations they wouldn’t have seen the light of day. So yes the buck stops at Obama’s desk.

chemman on June 4, 2012 at 3:22 PM

libfreeordie on June 4, 2012 at 2:47 PM

chemman on June 4, 2012 at 3:22 PM

The libiot isn’t that stupid.

libfreeordie is in the denial stage at this time.

cozmo on June 4, 2012 at 3:30 PM

libfreeordie on June 4, 2012 at 2:47 PM

Who runs the departments that have made all those regulations? Who appointed those department heads? If those department heads weren’t 4 square behind the regulations they wouldn’t have seen the light of day. So yes the buck stops at Obama’s desk.

chemman on June 4, 2012 at 3:22 PM

Like their messiah, his snot nosed followers automatically blame everyone else for their short comings.

AllahsNippleHair on June 4, 2012 at 3:31 PM

One simple, cheap way to unleash this economy: radical tax reform. If November is good to Republicans and they don’t make this a top priority, I’m done with them for good.

stout77 on June 4, 2012 at 2:48 PM

Much good it will do when half the population – most of them Obama voters, of course – doesn’t pay any taxes.

Archivarix on June 4, 2012 at 2:55 PM

That would change drastically under the reform I am thinking of;)

#1 would be abolition of the income tax itself.

stout77 on June 4, 2012 at 3:31 PM

is Obama’s fault because his administration has heaped loads of ambiguous risk on the economy… from Obamacare (how much will healthcare cost my company?) to environmental (how much will studies cost/delay my projects?) to taxes (will Democrats allow my taxes to increase, causing my company to post losses instead of profits?)… and on, and on, and on.

Honestly, at this point I am wishing for a Romney two term win and GOP control of both houses. Lets just have rampant corporatism for a decade. It will take that to explode all the lies of conservative “economics.”

libfreeordie on June 4, 2012 at 3:38 PM

Since liberal Democrats took control of Congress in 2007 and the Presidency in 2009, their policies have been like a bull in a china shop. Not only has it destroyed huge amounts of potential capital, but no one is willing to go back into the shop until the bull is removed! It’s too unpredictable, destroys too much and will leave the risk taker gasping his last breaths on the shop floor after goring and trampling him. And Government promises of calling 911 don’t hold much weight from the people that unleashed the monster in the first place!

dominigan on June 4, 2012 at 3:08 PM

Yes and Romney should be pounding this home.

This recession started in 2007 when Nancy became Speaker. Romney should be running against Nancy Harry and Obama.

Steveangell on June 4, 2012 at 3:40 PM

libfreeordie on June 4, 2012 at 3:38 PM

That’s the most intelligent thing you have ever written. The conclusion is wrong, as usual. But it shows promise.

cozmo on June 4, 2012 at 3:41 PM

Buried in all that nonsense about what Obama can’t control is this little gem:

Much of the problem stems from regulatory adventurism, and the ambiguous manner in which the regulatory state has expanded. Businesses cannot plan for largely-unwritten regulations stemming from ObamaCare and Dodd-Frank

Very surprised to see that in a pre-election AP story. Somebody must have had an accidental moment of journalism.

Tomolena1 on June 4, 2012 at 3:47 PM

In the present enviorment, investment in U.S. business bears the same attractiveness that Zimbabwe offers to foreign investors, and for the same reasons. Fear and uncertainty.

a capella on June 4, 2012 at 3:48 PM

Seriously, though this is not as stark as Ayn Rand wrote, but these companies are simply “Going Galt”. They are refusing to play by the stupid rules that are defined by the parasites. The rules are put in place by worthless government bureaucrats who somehow have authority with NO responsibility. This has GOT to end!

Fogpig on June 4, 2012 at 4:05 PM

Seriously, though this is not as stark as Ayn Rand wrote, but these companies are simply “Going Galt”.
Fogpig on June 4, 2012 at 4:05 PM

Actually, at the very high end, quite a few corporations are more than happy to sign on to Obamanomics. In any fascist economy, there are a thousand fat cats for every REAL crony who’s going to come out on top in the government sweepstakes.

Atlas is shrugging right now. But it is nothing like what Ayn Rand talked about. Of course it’s not a handful of geniuses moving to an invisible canyon somewhere. That was just plain silly.

What’s going on right now is that millions of American taxpayers are belatedly realizing that that the federal government considers them enemies of the state. This “rev0lution” is not nearly melodramatic enough to make a good movie – or even a passable novel.

But it is real. It is very, very real.

logis on June 4, 2012 at 5:12 PM

All the Obama-cheerleading the AP prints isn’t going to bring the economy back. To read their trash, Happy Days are Here Again!

Then cold, hard reality dumps on them.

GarandFan on June 4, 2012 at 5:20 PM

If the US wanted to take off the shackles, the easiest way to economic growth is to roll back the regulatory intrusions — perhaps especially on energy production — and demonstrate at least some progress on long-term fiscal and tax reform rather than another round of gimmickry.

Yes, YES, YES!!!!!!!!!!!!!!!

Deregulate. Deregulate. Deregulate. The best 10-letter solution we could possibly choose.

Another great piece, Ed.

J.E. Dyer on June 4, 2012 at 8:20 PM

Honestly, at this point I am wishing for a Romney two term win and GOP control of both houses. Lets just have rampant corporatism for a decade. It will take that to explode all the lies of conservative “economics.”

libfreeordie on June 4, 2012 at 3:38 PM

From a once-liberal I too would sometimes like John Q. Dumbarse to get just what he thinks he wants. Wrong conclusion, but nice idea.

MelonCollie on June 4, 2012 at 8:30 PM

Wasn’t Rick Perry saying the same thing. but the FairTaxers don’t care about what is really hurting business.

FYI, I buy, sell and broker chemical plant, refining, and plastics process equipment and plants. LOTS of private capital is sitting on the sidelines and especially historic profits earned by privately owned manufacturers who have WANTED and NEEDED to begin capital expansions of manufacturing here in the U.S. It ain’t taxes holding them back, it’s regulations that might not allow them to even put manufacturing expansions to use.

Kermit on June 5, 2012 at 12:01 AM

The article by Maureen Dowd this last weekend references his inability to make a decision in his youth. He would sit and wait to “see” what would happen. Often leading to chaos, he stood by and acted as an “observer” instead of participant, or leader. His inability to actually take a leadership role (even sitting in the back up quarterback seat in the picture of Osama’s raid) shows the chicken shit way he hides behind other peoples action and takes credit or dishes out blame.

I know fear, and this man reeks of fear. Only a complete looser would sit by while others died to make his point. To sit and watch while your friends and co-workers were, and are, punished for a decision you could easily have made to prevent it from happening; this type of personality is in desperate need of an ass kicking. Many times in my career I have seen these men, and then dished out a can of whoop-ass. Without any testosterone, his ability to act as a man is lost in his books, thoughts, feelings, and complete self centered world. Since he believes we revolve around him, he continually master. As soon as we quit revolving around him, he panics. Now that he is in panic mode, we can see that he is no longer “in charge”. He may hold the seat, but he is only a puppet and we see the strings.

Shortly this piece of worthless DNA will fade to the background and the adults will resume control. Good luck with you mediocre “community organizing” job.

Molonlabe2004 on June 5, 2012 at 12:34 AM