Hiring Decisions Are All About Sales

Moneybox
A blog about business and economics.
Jan. 17 2012 8:53 AM

Hiring Decisions Are All About Sales

The New York Fed's Empire State Manufacturing Survey (PDF) is out revealing that New York manufacturers are optimistic about the business climate, planning to add workers, and that their hiring decisions are all about sales and demand:

On a series of supplementary survey questions, 51 percent of respondents indicated that they expect their workforces to increase over the next six to twelve months, while just 9 percent predicted declines in the total number of workers—results noticeably more positive than in the June 2011 survey. The current results were slightly more positive for larger establishments (150 or more employees) than for smaller ones. High expected sales growth was widely deemed to be the most important factor among those who planned to add workers. When asked about anticipated changes in wages per worker, 80 percent of respondents indicated that wages would increase by less than 5 percent and almost all of the remaining 20 percent said wages would stay about the same. When asked about changes in benefits per worker, however, a sizable proportion, 37 percent, estimated that increases would exceed 5 percent.
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And there you have it. A businessman would be crazy not to want regulatory policy to be made more favorable to his firm. And the executives of businesses tend to earn pretty high salaries, so naturally they favor lower taxes on the high-salaried. But when it comes to job-creation, it's all about the marginal benefit of hiring an additional worker and that's all about sales and demand. Note that if President Obama's payroll tax cuts aren't extended past February, working- and middle-class families will have less cash in their pockets and debt-constrained households will have to cut back. That'll put a damper on the currently rosy outlook. The "recovery winter" scenario is based on the hypothesis that policymakers will avoid brand new mistakes, but an NPR segment I heard this morning about congressional wrangling over the payroll tax issue reminded me that brand new mistakes are a very real possibility.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.