National Job Creation Remains Steady

The Gallop Job Creation Index averaged around +19 in October.  The Job Creation Index is obtained from surveying employees’ perceptions of workplace hiring and firing.  The percentage of employers who are firing is subtracted from the percentage of employers who are hiring. For the month of October, 35% of respondents said that their employers were expanding their workforce and 16% of respondents indicated that their employers were reducing their workforce.  These estimates of hiring and firing nationwide have remained steady in recent months, as the Job Creation Index has stayed in between +16 and +20 for the majority of 2012.

Regionally, employers in the Midwest (+23) and the South (+19) are consistently hiring and expanding more than employers in the East (+16) and West (+16).  In addition, nongovernment employers continue to score higher on the Job Creation Index (+22) than public-sector employers (+4).  However, in October, federal government employers (+8 percentage change) and state government employers (+5 percentage change) showed a significantly greater increase in Job Creation Index scores than private sector employers (+1 percentage change).  

Ultimately, nationally, the Gallop Job Creation Index remains steady and positive. However, the nation’s net-hiring score has not yet been restored to its pre-Recession 2008 peak (+26).  It is predicted that in response to the 2012 election, hiring and firing averages will fluctuate. If government leaders are able to effectively respond to economic challenges and implement national policies that boost employers’ confidence in the economy, it can be expected that the nation’s net-hiring score will improve.  

Countries Improving Conditions to Conduct Business

According to a measure produced by the International Finance Corporation, Georgia, followed by Rwanda and Belarus, showed the greatest improvement in the ability to conduct business. The IFC measures the ease of handling business by taking into account various factors, such as how long it takes a company to pay taxes and become incorporated. Egypt, Mali, Colombia, and China also topped the list. 

The Economist notes that corruption, or lack thereof, plays a major role in a countries ability to easily conduct business. As figure 2 illustrates, greater corruption perceptions correlate to a lower “ease of doing business” ranking. Additionally, it appears that the position of countries to handle business has improved in most areas since 2005 partly because many states are following Singapore’s model of business. Singapore holds the top spot in the Global Dynamism Index, an index that measures which countries have the best business environments. 

Income Inequality a Growing Problem in Urban China

A study recently featured in the Journal of Comparative Economics examines income inequality in urban China. Capital income increased during the late 1980s and continued to rise until 2009. The researchers found that the share of capital income between classes was grossly unequal. For urban residents, capital income accounted for less than 2% of their total income. In contrast, for the top 1% in China, capital income accounted for more than 30% of their total income. Additionally, the share of capital income for the top 1% is increasing rapidly. In 1988, capital income only made up 10% of the top earners income, but in 2007 this figure increased to 37%. The researchers also examined the influence of capital income on income inequality by analyzing the Gini coefficient for the eastern, central, and western regions of China. Although there appeared to be no statistically significant difference between the central and western regions, the Gini coefficient was higher in the eastern region, indicating that the eastern region has more extensive income inequality.

The Long Road Back from Financial Crises

Writing in the New York Times's Economix blog, Catherine Rampell reviews a paper presented two years ago from Carmen Reinhart and Kenneth Rogoff, documenting the road to recovery that followed twelve different financial crises from the American Great Depression to the Argentinian crash in 2001. What they found should have shed doubt on the optimistic projections of rapid recovery in 2009 and 2010 and reminds us that recovery remains far from certain, even as most have written off disappointing GDP growth numbers from the first quarter as the results of transitory factors like excessive snowstorms.

The chart above shows that for unemployment -- a lagging indicator to be sure, but one with profoundly important impacts on people's everyday lives -- the aftermath of financial crises increases unemployment by an average of 7% over an average of 4.8 years. By those metrics at least, America's Great Recession could have been far worse.