Who Pushed the Pause Button?

By Andrew Paparozzi
In July 9, 2010

The economic recovery that was gaining some momentum earlier in 2010 has hit some speed bumps. Looking at the various measures of economic activity, it would appear that someone has pushed the pause button. However, this is not unusual during the recovery phase of the business cycle, as an initial spurt from inventory rebuilding and pent up demand begins to fade. The question: Is this a pause that refreshes or one that lingers? Clearly, the uncertainty hanging over the economy in the name of current and future public policy (health care reform, financial reform, tax policy, energy policy) is restraining the private sector. As evidenced by significant cash holdings, many companies are adopting a wait and see attitude. This is especially true for small businesses, where resources are more limited and margins for error are tighter.

Nowhere is the high degree of uncertainty more evident than in the labor markets. With issues regarding taxes and regulations still up in the air, companies are holding back on hiring decisions for as long as they possibly can. The latest data from the Bureau of Labor Statistics (BLS) show that there is some job creation taking place—but not nearly enough to make a significant dent in the unemployment rate. Since December, private nonfarm payroll jobs are up 593,000, but they are still down 375,000 from a year ago. During the 12 months ending in June, a gain of 151,000 jobs among service-providing industries was more than offset by goods producers shedding 526,000 positions. Manufacturing jobs, which are down 112,000 over the past year, have begun to edge up in recent months.

Print is not among the manufacturers showing job gains—at 494,000 in June, nonfarm payroll employment for the industry is down 6,100 from December. Nonetheless, there has been some improvement among the various business indicators for the industry. But as shown by the NAPL Printing Business Index (PBI)™, improvement has and likely will continue to be erratic. The PBI™ reading for June is reflecting the pause we’ve seen in overall business conditions. According to NAPL’s Printing Business Survey, the index stood at 44.6 in June, down from 46.7 in April but still above the 35.0 recorded in December. A reading below 50.0 indicates that more companies report activity is slowing down than report activity is picking up. The printing industry is not immune from the aforementioned uncertainty, far from it. When NAPL research participants were asked what concerns them most heading into the second half of 2010, the economy topped the list with a citing by 80.6% of participants. Rising health care costs, rising costs of doing business, and uncertainty about policies from Washington were among the next five concerns. For further discussion on these and other concerns, see the upcoming NAPL Printing Business Conditions: July 2010.

Andrew Paparozzi        Joseph Vincenzino        Kong Lue Wang

Andrew Paparozzi

Epicomm's Andrew Paparozzi, Vice President/Chief Economist, is well-known for his accurate and thoughtful discussions on the economy and US commercial printing industry. A foremost author and speaker on economic business trends in the printing industry, Paparozzi heads Epicomm's Printing Economic Research Center.

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