As Economic Headwinds Pick Up, Employers Lie Low
After adding a robust 275,000 new jobs back in January, job growth appears to be slowing. The Labor Department reports that the economy added only 69,000 jobs in May.
Meanwhile, despite the worst recession in generations, there are still countless small business owners plugging away around the country, seeking to expand and hire more employees.
"This year we hired two more technicians, and we hope to hire one more," says Srinivas Konanki, who employs 20 people at Pipette Calibration Services, a laboratory equipment company he owns with his wife.
The Konankis operate just outside Boston. Their company calibrates very precise lab tools called pipettes, which measure and dispense liquids.
A pipette looks kind of like an oversized ballpoint pen, with a click button on the top. But instead of pushing out a pen tip, the button is used to dispense liquid — sort of like a fancy squirt gun.
"The difference here is that you are actually measuring what you're squirting," Konanki says, rather than just indiscriminately shooting water. "And so this [measures] very accurate volumes."
Konanki is expert in the workings of pipettes. His wife, Manjula Konanki, jokes that he could talk about them for hours.
But get them talking about their business, and the Konankis take a more serious tone.
"We, as a small business, have been very careful as to how we spend our money," Srinivas says.
It's All About Optimism
For any business, job growth has a lot to do with confidence. To hire new workers, an entrepreneur needs to be optimistic that business will keep picking up.
The economic environment has given business owners plenty of cause for caution. One thing troubling Srinivas is the ongoing economic turbulence in Europe. Many European countries run research labs in the Boston area, and "when they make cuts, they make cuts all over," he says. "And when that happens, we see our business cut down."
His other big concern is potential cutbacks in U.S. government spending, particularly potential cuts to the National Institutes of Health.
That's because, at the end of the year, as part of what's called "sequestration," the NIH could be hit with an across-the-board 8 percent funding cut.
Sequestration will only happen if Congress is unable to hit budget-cutting targets it imposed on itself through legislation last year. But a failure to reach those targets would trigger dramatic broad-based cuts like those proposed for the NIH, among numerous government agencies.
"Even a couple of percentage points funding [cuts] to the NIH — it definitely makes a big difference to all the labs out here," Srinivas says. "That will definitely affect our business."
Fear Of The 'Fiscal Cliff'
Betsey Stevenson, a labor economist with the University of Pennsylvania's Wharton School of Business, says Srinivas' concerns are very real.
She agrees that Europe could be creating a headwind on hiring in the U.S. and says many other businesses are worried about what actions Congress might take later this year as it decides whether or not to extend the Bush-era tax cuts and wrestles over unemployment benefits and required spending cuts.
All these decisions facing Congress at year's end have been collectively dubbed the "fiscal cliff."
"Congress is saying, 'We're going to make this difficult,' " Stevenson says. That sends a signal to all the actors in the economy, she says, that "there is potential for real damage to our economy coming in the future, and you should prepare for it today."
Some Green Shoots
Despite all these unanswered questions, the U.S. is still managing to add new jobs each month.
"We've had slow growth, but it is growth," not losses, says David Kotok, chief economist at Cumberland Advisors, a Florida-based investment advisory firm.
Kotok acknowledges that job growth has slowed since the start of the year. But while he says that's disappointing, he also sees reasons to be optimistic.
"The manufacturing sector is growing in the United States," Kotok says. As it does, he continues, it creates higher-paying jobs. The energy sector is also doing well, he says, with rapid growth in natural gas exploration promising to create many more well-paid work opportunities.
"And the third piece," Kotok says, "is the gradual stabilization of housing. It's happening slowly — but it's happening."
If that trend continues, that eventually means more jobs for carpenters, electricians and many other people who work in related industries.
Kotok, the chief investment officer for a firm that manages billions of dollars, has to put his money where his mouth is when it comes to reading the economic tea leaves. And he says he's placing his chips on a slow but continued recovery for the U.S. economy and for employment.
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