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Businesses 'not hiring' because of economic uncertainty

Weak sales are keeping many businesses from hiring new workers. Consumers are not spending at their normal levels, and although housing has improved, it's not leading the economic recovery.

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“There is so much uncertainty, you don’t want to commit to hire anybody,” he says.

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The US Chamber of Commerce, which represents larger corporations, says a lot of the uncertainty for its members is Washington-generated.

“Tell me what my taxes will be as a company,” says Bruce Josten, the chamber’s executive vice president for government affairs in Washington. “No one can tell me.”

For example, he says, Congress failed to extend the research and experimentation tax credit, which expired last December.

“The R&E tax credit has been on the books for 30 years,” says Mr. Josten.

The House, he says, has passed legislation (the American Jobs and Closing Tax Loopholes Act of 2010) that is raising taxes on multinationals, retroactive to Jan. 1. It has also hiked taxes on capital investments made by Subchapter S corporations, which are normally small companies that pass their profits to shareholders but don’t pay federal income taxes.

In addition, the House has passed higher taxes for venture-capital funds, hedge funds, and private-equity funds. The legislation has yet to pass the Senate.

It’s not just taxes, says Josten. Businesses are still unsure how much the new health-care reform bill will cost them, he says. “Many companies are finding their premiums are rising,” he says. “Companies like some certainty on fixed costs.”

The uncertainty is starting to freeze business decisionmaking, says one economic development executive in the Southwest, who preferred to speak on background.

“We have been inquiring about what’s going on, and one of the clear messages about the slow pace of investment is because of the administration’s policies,” he says.

However, one longtime employment observer says the slowdown in private-sector hiring is just part of the ups and downs in the economy.

“We want a straight-line recovery, and it won’t be that way,” says John Challenger of the outplacement firm Challenger Gray & Christmas in Chicago. “We are in a three steps forward, two steps backward mode.”

Until it’s clear the economy has a healthy head of steam, he says, that’s a natural reaction. “You don’t want to hire someone and then have to let them go – it’s painful.”


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