Wall Street Journal
February 3, 2010
By Paul Vigna and John Shipman

There's a reason the Obama administration wants to spend $100 billion to get businesses to start hiring: Few companies are doing it on their own.

In the last several weeks, a number of big employers have commented on their staffing levels, or their outlook for employment overall, and it's telling that there is little optimism. The problem, of course, is that consumer spending—the one great, irreplaceable economic stimulus—remains stuck in the mud.

Automated Data Processing Inc., which processes most of the paychecks issued by employers, offers a good window into corporate hiring. On Tuesday, the Roseland, N.J., company reported revenue from its payroll-tax processing business fell 7% in its latest quarter, and the number of employees on its clients' payrolls in the U.S. declined 5%. The company expects revenue in its payroll unit will drop 1% this fiscal year. The next six months "will be challenging," said Chief Executive Gary Butler.

Of course, hiring is a chicken and egg dilemma. Increased consumer spending can entice companies to hire, but at this point in the recovery, new jobs are badly needed to spur consumer spending in the first place. "Unemployment seems to be the key determinant of what happens next in the United States," 3M Co. Chief Executive George Buckley said last week.

Blue-chip companies that recently reported quarterly results seem to be singing the same dirge. Take American Express Co., for example. The company has posted improving credit trends, but finance chief Daniel Henry noted recently that without job creation, "credit metrics can only improve so far from the relatively high current levels."

Temporary staffing firms Manpower Inc. and rival Kelly Services Inc. often experience an uptick before full-time jobs return. Manpower on Tuesday said it is seeing "good growth" in the U.S. Kelly's results, due Friday, could confirm the trend.

Friday's January non-farm payrolls report is expected to come in flat after December's surprising drop of 85,000. It could show some growth, partly due to temporary Census Bureau hiring. ADP also releases its own research Wednesday on employment, and is expected to report the economy shed another 55,000 private-sector jobs.

There are some early signs of a bottoming, though. The Institute for Supply Management's January manufacturing employment index rose 3.1 percentage points to 53.3, its highest since 2006. Ford announced last week it will add a second shift at a Chicago plant, creating 1,200 union jobs. The catch: New workers will get significantly reduced wages. Verizon Communications Inc. cut 13,000 employees in its wireline business last year, and expects "a similar level" of cuts in 2010.

Verizon Chief Executive Ivan Seidenberg said, "Our view this year is, we have discounted a lot of help from the economy." Any pickup in the economy, he said, won't come until much later in the year, and won't have much of an effect on 2010.

The Upshot comments on trends in corporate earnings.

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