Marketplace, March 19, 2010, Friday

Marketplace

March 19, 2010, Friday

Marketplace

Can the jobs bill make a difference?

Congress has passed the first in a series of bills intended to encourage companies to hire more workers. Marketplace's Jeremy Hobson and Tess Vigeland look at whether the legislation can put a dent in the 10% unemployment rate.


TESS VIGELAND: Jobs, jobs, jobs, jobs, jobs. This week, Congress turned its attention to the millions of Americans holding up their own "help wanted" signs. It passed the first in a series of bills intended to encourage companies to do more hiring. It includes a $1,000 tax credit for some new employees, and exempts companies from paying Social Security taxes on those new hires.

The question is: Can a bill like this make a dent in a nearly 10 percent unemployment rate? Marketplace's Jeremy Hobson is in New York, and he joins us. Hi, Jeremy.

Jeremy Hobson: Hi Tess.

Vigeland: So the bill passed. Does this mean more people are going to find work?

Hobson: Well, I hate to say it, but one of the guys who originally proposed a hiring tax credit says, maybe 200,000 to 250,000 people will find work. You've got to remember 8.4 million have been laid off since the recession began.

Vigeland: So this is the proverbial drop in the bucket.

Hobson: Exactly. John Bishop is the guy who proposed a hiring tax credit. He's a professor of human resource studies at Cornell. And he says this $1,000 credit is much smaller than the one used in the late 70s to spur hiring, and it's only for people who've been laid off for at least two months.

John Bishop: It's more than just watered down. It's trying to change who is hired, rather than trying to send a signal "We want your total employment to go up."

Hobson: He says a larger tax credit, maybe $5,000 per new employee, would've been more appropriate. But, of course, that costs more and nobody in Congress really wants to take the position of wanting to spend more money right now, even if it means creating jobs.

Vigeland: Yeah. There's been a lot of talk recently that this is, in fact, a jobless recovery. And it sounds like this bill isn't going to do a whole lot to help that.

Hobson: Yeah and we got another indication that it is a jobless recovery. The Brookings Institution that came out with a study this week, it looked at the 100 biggest metro areas in the country and found that that they're recovering at a slower rate than at the two-year point following the last three recessions in this country. The worst hit areas in the survey, maybe not a surprise, the places that were really hit by the housing bust: Florida, Nevada, California. 99 of the 100 places in the survey have not gained back as many jobs as were lost during this recession. Any guesses on the one that has?

Vigeland: I probably shouldn't even try to venture... Podunk?

Hobson: Nope. It's McAllen, Texas.

Vigeland: McAllen, Texas. Why?

Hobson: Well, McAllen, Texas, and a lot of parts of Texas and Oklahoma and upstate New York are the places that are getting jobs right. And Chris Lowe, who is the chief economist at FT and Financial here in New York points out, all of these places have one thing in common when it comes to jobs.

Chris Lowe: We're talking about agriculture and commodity production. It's not manufacturing, it's not tech. It's pulling resources out of the land, which we obviously do, but it's not where we really shine.

Hobson: And he says one other thing that makes this recovery different from others is that because housing prices have fallen so much, so many people are underwater on their mortgages, even if they wanted to move, they can't. They're stuck in their homes.

Vigeland: Well, I know that Congress is talking about more legislation to create jobs, specifically in small business. What are the folks that you've been talking to think is the best strategy at this point?

Hobson: Well, a bigger hiring tax credit. They point to the 70s, they say, "Look it worked in the 70s when there was a hiring tax credit." Many people say simply, the demand has to come back. They're not gonna hire until they're sure that people will buy their products and that the recovery is here to stay. And as much as the stock market keeps going up, there are still a lot of jitters whether we're in for a double dip recession.

Vigeland: Marketplace's Jeremy Hobson speaking with us from our New York bureau. Thanks so much.

Hobson: Thanks, Tess.