News / Economy

Wary Businesses Consider Investments as US Economy Improves

A workman welds a tank at JV Northwest, which manufactures stainless steel vessels, in Camby, Oregon, February 13, 2012.
A workman welds a tank at JV Northwest, which manufactures stainless steel vessels, in Camby, Oregon, February 13, 2012.

The battered U.S. housing and job markets are improving as uncertainty about economic forecasts declines, according to a just-published study by dozens of key economists. Other research shows growing confidence could translate into more business investment and jobs.

Forty-five experts who analyze economic issues for major companies say a flurry of mostly upbeat economic reports means U.S. unemployment and job creation are getting better.

Members of the National Association for Business Economics [NABE] say they expect the U.S. jobless rate to average 8.3 percent for this year, which is six-tenths of a percentage point better than their prediction just a few months ago.

NABE member Shawn DuBravac said companies are encouraged by growing confidence in economic forecasts, and willing to bet on future economic growth.

“There is less uncertainty, that makes companies more willing to take on new hires, to bring on and create new jobs," said DuBravac.
DuBravac said the survey shows that companies now are boosting their spending on machines, materials, and the equipment needed for employees to be productive.

U.S. companies have hundreds of billions of dollars in reserve that could be used to increase business investment and hiring, according to a recent study by University of Maryland economists including Jeff Werling.

Werling said companies were badly stung by the recession, however, and have been slow to consider new investments.

“From the perspective of the consumer and some corporations, the financial crisis dealt their balance sheets such a blow [depleted their assets so much] that they just can not get there yet," he said.

Werling’s research was conducted for a U.N. agency.

Companies spent the first part of the recession cutting costs and workers, striving for greater efficiency to survive as business became ever more competitive. But the NABE’s DuBravac said firms have done just about everything they can think of to boost the productivity of the current work force.

“Corporations are moving into a period where if they want to continue to grow and capture these opportunities, they will eventually have to expand their labor force,” said DuBravac.

The business economists say improvements in business spending and jobs are easing the problems in the battered housing market, and predict a sharp improvement in housing starts this year.

They are less optimistic about exports, predicting the rate of growth in that key sector will slow down.



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