Capital Investment Slowdown in U.S. Signals Reluctance to Hire

August 26, 2010 04:53

A slowdown in U.S. business investment may soon hit the job market, further hindering a recovery in the world’s largest economy.

By Timothy R. Homan at


Employers are reluctant to take on more staff until they see more evidence of durable growth, keeping unemployment near a 26-year high and holding back the consumer spending that makes up 70 percent of the economy. A Labor Department report next week may show that private payrolls failed to grow in August for the first time in eight months, said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York.

“If capital spending does weaken further, then that raises some concerns about labor demand and whether firms want to increase hires,” said Feroli, who reckons the odds of a recession have increased in the past two weeks to about one-in- three. A decline in private payrolls “would raise some concern about whether the recovery is proceeding or not. If you see a couple of months of decline you’d be more confident that we actually were in a recession.”


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