We got some very good news as far as the overall economic recovery goes: businesses, especially small businesses, are hiring. As this CNN Money article notes, small businesses, in part due to their operational agility, are often the first to start hiring as the economy improves. Most importantly, the 297,000 jobs added significantly outpaced the expectations of most economists.
Small businesses saw a sharp jump in hiring in December, according to an ADP report released Wednesday.
The private sector added 297,000 jobs overall last month, with almost all of the gains coming from companies with less than 500 workers. Those firms added a net 261,000 new positions during the month, ADP estimates.
This doesn’t mean unemployment rates will markedly fall in the near future, and the country surely still isn’t out of the woods yet, but it is at least some good news — something that has been hard to find for the past two years.
Unfortunately, there is an increasingly prevalent threat looming that may hamper economic recovery on a global level: energy costs. The BBC explains.
The current high price of oil will threaten economic recovery in 2011, according to the International Energy Agency (IEA).
It said oil import costs for countries in the Organisation for Economic Co-operation and Development had risen 30% in the past year to $790bn (£508bn). The agency says this is equal to a loss of income of 0.5% of OECD gross domestic product (GDP). The IEA’s chief economist said oil was a key import of any developed country.
There are also concerns about the rising costs of other commodities. The UN’s Food and Agricultural Organisation (FAO) said the high oil price had pushed the price of food to a new record.
The article goes on to mention that higher oil and coal prices don’t just affect food, of course, but trade balances and household spending as well. Taken together, these two bits of information feel like one step forward, two steps back.
And this brings us to the Federal Reserve’s latest plan to buoy the economy.
A video that was made toward the end of last year was recently brought to my attention by by Forbes’ Amity Shales, who calls the viral cartoon Quantitive Easing Explained the “the best commentary on Fed policy currently out there.” I’ll let her explain in her own words why the blunt, cut-to-the-chase message about the Fed’s controversial decision to buy $600 billion worth of Treasury bonds has resonated so well with an American public tired of hearing government officials tout economical theory that few laymen understand — particularly when all most laymen want is more work.
What the national leap to these new media tells us is that many Americans are desperate. They want to know what must be changed—or kept the same—in the U.S. economy. Professional economists may be on the trail of the answer, but to find it they have to dedicate more time to inquiry and less to self-important obfuscation.
This so-called Quantitative Easing 2 (or QE2 as much of the financial media likes to term it so endearingly) will remain controversial for some time, and neither side will be proved correct until they are. And really, as with most interventionalist economic policy, unraveling all the threads to even determine what actually caused what will always be difficult — if not impossible — to know. There are so many externalities and all that.
So the mud-slinging debates surrounding the Fed’s latest move will remain ugly as many workers (or wannabe workers) ask similar questions to those in the video below — and companies continue to ponder when it will actually be safe to once again start spending and hiring.Risk Management Magazine and Risk Management Monitor. Copyright 2013 Risk and Insurance Management Society, Inc. All rights reserved.