What Will Stimulate America's Job Market?

By Stephanie Taylor Christensen The latest report by the Bureau of Labor Statistics shows the unemployment rate still hovering around 9%. While it has shown some positive activity, with employment rates in leisure, hospitality, and health care rising, little has changed in the job market elsewhere. Leaving many to wonder, what is it going to take? UC San Diego conducted a study, and published the findings in a book called Closing America's Job Gap. The study identified 10 ways that the US Congress can stimulate job growth. Here is a look at some of the recommendations, and why things may not always be what they seem.

(To read Peter Atwater's thoughts on why our banking system needs more capital now, click here.)

Recommendation #1: Encourage Start-Ups. In order to maintain progress, Congress needs to “create and keep good jobs in America by supporting innovative start-up companies.” The Reality: Entrepreneurs know the recession and credit crunch over the past few years has presented challenges in obtaining financing. Banks have tightened their lending criteria. The amount of US Small Business Administration (SBA)-backed loans dropped from $28.5 billion in 2007 to $17 billion in 2009. Lenders like Wells Fargo (WFC), Huntington Bancshares (HBAN) and JPMorgan Chase (JPM) all say they're committed to small-business lending. But, particularly for start-ups, huge hurdles in securing funding remain. The current administration has publicly committed to bolstering small-business efforts; those incentives have helped SBA lending rise to $22 billion in fiscal year 2010. But, regardless of the state of the economy, banks are more likely to lend to established businesses than to a start-up.

(To view John Mauldin's article on the unsustainability of the US fiscal situation, click here.)

Recommendation #2: Tax Incentives for Training and Tuition Assistance Programs. “Employers want to increase their investment in employee education,” according to Closing America's Job Gap. Further, it contends that the government should flip the bill for the education incentives. The Reality: According to a survey conducted by the International Foundation of Employee Benefit Plans (IFEBP) 94% of organizations actually do offer some form of employee education assistance. While very few of the programs have the perks of J.M Smucker, which offers employees 100% tuition reimbursement and no cap on the amount, varying degrees of assistance are common. But the real issue may not be one of money at all. The IFEBP study also revealed that three-quarters of the organizations offering tuition assistance have “less than a 15% participation rate” among employees.

(To view Stone Street Advisors' piece on ETF Mania and the Markets, click here.)

Recommendation #3: Support Regional Business Clusters. Closing America's Job Gap maintains that in order for the domestic job market to advance, the US government should support cluster initiatives, following the lead of countries abroad. The Reality: The objective of cluster initiatives is essentially “strength in numbers,” by joining networks of organizations and businesses in a geographic area known for strength in producing a specified service or good. One of the most successful clusters in the United States is Silicon Valley, home to companies like Cisco Systems (CSCO), Apple (AAPL), Intel (INTC), Hewlett-Packard (HPQ), Oracle (ORCL), and Google (GOOG), among thousands of other technology start-ups and venture capital firms. And while cluster programs at the federal level are relatively new, they're on the radar of the SBA, which has made recent investments in bolstering clustering initiatives. In September 2010, the SBA announced “funding support for 10 regional economic clusters,” to expand the role of small businesses in these areas. The funding is part of a new pilot program called “Innovative Economies,” dedicated to regional economic development and job support in ten key clusters. Among them, the Agriculture Innovation Cluster in parts of California; the Carolinas' Nuclear Cluster; NorTech, focused on technology-based economic development in Northeast Ohio; and the Upper Michigan Green Aviation Coalition.

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