To understand why jobs are so scarce, consider John McFarland and Nicole Rosen. The two share something in common: They're reluctant to spend freely.
McFarland is CEO of Baldor Electric Co. in Fort Smith, Ark.; Rosen is a consumer in Washington state. Each is earning and saving money. Yet McFarland won't hire until consumers spend more. And Rosen won't spend more until jobs seem secure.
Therein lies the standoff that helps explain the weakness of the recovery and the depth of the jobs crisis. Each side — employers on one, consumers on the other — is waiting for the other to spend more. Until then, the recovery will likely feel shaky. And job openings will be few.
Which side will blink first?
Many economists predict it will be businesses. Sometime this year, many companies are likely to decide they must replace worn-out equipment or they can't squeeze any more output from their existing staff, according to estimates from Moody's economy.com and IHS Global Insight. Some will then ramp up hiring.
Yet business expansion and hiring are likely to remain so modest that it could take until 2011 or 2012 for consumers to respond by opening their wallets. Until then, consumers and employers will likely remain wary of hiring or spending much. The national jobless rate, now 9.7 percent, will stay high. (Florida's jobless rate was 11.8 percent in December, with a delayed January report due out Wednesday.) And employers will create nowhere near the roughly 10 million jobs that economists say are needed to restore the job market to its prerecession health.
The government likely won't help much. Stimulus spending is waning. So are the Federal Reserve's emergency support programs. That leaves more of the job-creation burden for employers and consumers.
Yet companies are hoarding cash. And consumers — squeezed by flat wages, a tight job market and shrinking home equity, and loath to take on more debt — are stashing away savings and paring debt.
Since the financial crisis erupted, consumers have focused on saving. In 2009, the U.S. personal savings rate reached 4.3 percent, the highest since 1998.
Companies remain reluctant to invest in major projects that would require adding workers.
McFarland's is among them. Baldor Electric makes industrial motors for factories. Sales have ticked up this year. But nothing gives McFarland confidence that economic growth is poised to accelerate.
That's why Baldor isn't increasing spending or hiring. It ended 2009 with a record $215 million in cash flow. In better times, McFarland said Baldor would have plowed that money into upgrading equipment or adding to its work force of 6,500.
This year, Baldor used cash to pay down $121 million in debt.
If CEOs expect consumers like Rosen, 29, to start spending freely again, they'll be waiting a while. The freewheeling days are over. Rosen and her husband bought a $275,000 house in 2006 with an adjustable-rate mortgage. The rate is 8.5 percent now, and Rosen fears it will rise further.
"Nobody is giving us the confidence to go out and spend our savings," she said. "We may need it to pay our house payment. Or we may need it to pay medical bills."