Confidence Fairy Speaks: Says “It’s Demand!”

Jul 19, 2011

This WSJ piece(in the previous entry) reminded me of a conversation I had the other day with a guy who runs his own very small business (a car service).  He told me the biggest problem he faced was “uncertainty.”

“What?” I thought.  Don’t tell me this guy is about to complain about health care reforms that kick in years from now and don’t even effect businesses of his size?

In fact, he said: “Yeah, I can’t count on enough customers coming through the door to even plan shifts for my drivers.  I don’t know where this economy is headed.”

In other words, he’s uncertain, but it’s about demand, just like most of the respondents to the WSJ survey (hat tip: KR):

“The main reason U.S. companies are reluctant to step up hiring is scant demand, rather than uncertainty over government policies, according to a majority of economists in a new Wall Street Journal survey.

“We’re hiring a little here and there—but it’s not what it should be,” said Daniel Cunningham, chief executive of Long-Stanton Manufacturing Co., of Hamilton, Ohio. “And it’s because of the lack of demand.” Long-Stanton, which makes metal parts for the aerospace, medical and other industries, has snapped back from the recession, “but volume is still not up to where it was, or where it should be,” Mr. Cunningham said.”

What’s happening here is business owners, especially those with smaller operations who lack access to faster growing emerging economies, are having trouble forming expectations about future demand.   So they can’t plan ahead.  That makes them nervous and risk averse in the present.

Getting rid of “Obamacare” wouldn’t help them a whit.  Generating some demand could help them a lot.