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.

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3 Responses to It’s Ever and Always About Demand

  1. Sue says:

    It makes me very angry, seeing all those people out there refusing to support Governor Walker by going around being all poor or underpaid or uninsured and stuff. How are the job creators supposed to keep Governor Walker in office if they just take the money and don’t create jobs, hmmm? We have to help them!
    Look, people, quit doing selfish things like trying to find the money to get your kid through college now that funding is slashed. Go out and spend that money on crap at Menard’s so John can keep his race car AND maybe hire a couple of stockers. Quit putting roadblocks in front of job creators by speaking up at public meetings, trying to make your elected betters understand things from your point of view, like explaining what that pesky public trust doctrine is.
    If only we poors would just shut up and buy and quit expecting things like a decent wage. So unreasonable.

  2. jimspice says:

    Plus, demand is pretty easy to measure in levels of discretionary income. Confidence? Not so much. You’d think that those planning for and investing in anticipation of future events in the business world would opt for the more more measurable, and better predictive, indicator.

  3. Gareth says:

    Has anyone made an effort to compute the loss of demand due to public employee pay cuts and layoffs in Wisconsin? It could be the reason Wisconsin’s economy is sinking while the national economy is showing signs of growth.

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