Neil Irwin has written a terrific piece in the Washington Post that explains why U.S. firms are so skittish about hiring:

Across the industrial parks and office towers of the Chicago region, in a more than a dozen interviews, senior executives said they see Americans for years ahead paying down debts incurred during the now-ended credit boom and adjusting spending to match their often-reduced incomes.

I wrote about this phenomenon last summer:

Citing 2007 data from the Federal Reserve, Tom Petruno of the Los Angeles Times recently noted that while the top 10% of earners have debt-to-disposable-income ratio of 116%, and the bottom 40% of earners have a ratio of 133, those in between–that is, middle-class households–have a ratio of 205%. This 50% slice of the population represents 46% of consumption, and it is precisely this group that will have to dramatically pare back its consumption to pay down its debt. This is a recipe for weak consumer demand for a decade or more, which means another decade of sluggish growth.

At the end of Irwin’s piece, he gives readers a hint of the limits of fiscal and monetary policy:

David Speer (no relation to Jason) is chief executive of the company, which has 60,000 employees worldwide in more than 800 business units and $14 billion in sales. He said an additional burst of fiscal stimulus from Washington might help boost economic growth for a period of months. But that is unlikely to affect his decisions about hiring and expansion, which Speer said are based on expectations for sales over years to come, not just the immediate future. As long as U.S. consumers remain deeply strained, he is unlikely to undertake aggressive expansion.
More fiscal stimulus “might help make things a little better for a couple of quarters, but I’m not sure it would get at the underlying economic issue,” Speer said. “The core question is: How do you get consumers back on their feet. We need growth in a sustainable way, not another Band-Aid.”
Nor is it clear that new Fed action, such as steps to try to lower long-term interest rates and encourage investment, would prompt him to expand.

I recently read Accelerating Out of the Great Recession: How to Win in a Slow-Growth Economy, a book by David Rhodes and Daniel Stelter of the Boston Consulting Group. It offered valuable insight into how firms should prepare for an era that is likely to be both economically stagnant yet highly competitive. Among other things, Rhodes and Stelter describe how firms like GM and Chrysler managed to outmaneuver rival firms during the Depression era. I recommend it for its cant-free, decidedly utilitarian take on the economy we’re stuck with for the next decade.