Several reasons are contributing to lower hiring expectations:
- A lot of companies, and economist for that matter, have doubts that the recent upturn is sustainable. Analysts suspect the growth in third quarter may be a response to companies restocking from super low inventories and government stimulus spending, rather than a signal that the recession is actually over. Continued economic uncertainty is driving many businesses to proceed with caution while they wait to see how economic recovery pans out.
- Having gone through huge staff reductions, organizations have learned to do more with less—in the second quarter of this year, productivity (output per hour of work) actually grew at an annual rate of 6.6%. Out of necessity organizations have become more efficient in their use of labor, making it possible for them to put off hiring for longer.
- In the US, there are quiet a few large legislation pieces that could significantly impact costs. The potential impact of things like health care reform, environmental regulations, and a tax credit for hiring could have big impacts on business strategies and costs. For example, if the government doesn’t act fast on making a decision about the hiring tax incentives, organizations may hold out to hire waiting unnecessarily for these benefits. Many organizations are waiting to see how regulatory legislation may impact their business before they add large numbers of workers to their payrolls.
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