It’s Ever and Always About Demand

Businesses expand and contract for one simple reason: demand.  All the voodoo supply-side nonsense the right spouts, all that crap about regulations or taxes, or “confidence” is just pure, unadulterated bunk.  Companies don’t hire new workers because of a loose regulatory climate.  The hire because there is demand for their goods or services.  It’s about demand.  It’s only about demand.  It’s always been about 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.

Demand is the “most important factor among those who planned to add workers.”  Huh… Not tax cuts? Not less regulation?  Not the end of the “job killing” Affordable Care Act (aka Obamacare)?  Imagine that.  Keynes was right after all.  Shocking…  Or not, to those of us who understand how macroeconomics works.

And how do you generate demand?  You make sure as many people as possible are productively employed in good-paying jobs, public-sector or private-sector, it doesn’t matter.  You just need people out there with money in their pockets to generate that sweet demand.