Private sector does not like the combination of (1) low unemployment (2) uncertainties.

David Brooks' recommendations are quiste solid. And, I split out the core of the article:

----------

First, extend unemployment insurance; that’s a foolish place to begin budget-balancing.

Second, you need to mitigate the pain caused by the state governments that are slashing spending.
- You need a program modeled on Race to the Top.
- You will provide federal money now to states that pass responsible long-term budget plans that will reduce spending and pension commitments.

That would save public-sector jobs and ease contractionary pressures without throwing the country into a fiscal-debt spiral.

----------

It is interesting that Brooks points to state level deficits as the crux of the issue.

Many states are in retrenchment mode for several months, with people on mandatory leave/reduced hours for one day a week either reducing their salary or accumulated compensated time thereby reducing the state's liability. 

Even with what Brooks suggests, the first thing that will recover is the public sector.. and at the state level.

A HUGE portion of the "private sector" jobs is created by the funds that flow from the public sector in the form of contracts for various soft and hard deliverables as well as grants.  These are funds at both the federal and the state level.  Most of these contracts have dried up for the past several years, especially all of 2009.   Anyway, with recovery of the states, their "dependent private sector" could begin to improve.

When the private sector sees the unemployment numbers stabilize and some funds begin to flow, there may be some hiring.

I hope this begins to happen before Fall. By then, at least some of the health care reform related vagueness will pass - a congressional testimony is coming up in another 10 days that will clear some of the unknowns as the industry leaders speak up. Most of the HCR will get defined in the months ahead this and next year.  What is truly troubling the private sector are vagueness in the financial reform and threat of cap and trade - rather the vagueness on the extent of adverse impact of that impending legislation which they have now come to expect to somehow pass although they do not have much basis to believe that it will - senate simply does not have the numbers in any kind of coalition to pass cap and trade.

I believe the economy is turning around. And, given what I see in HCR, if I am not an insurance company, I am not so worried.  Yes, insurance industry will probably steeply cut advertisement spending.  They must going forward spend 80% of their revenues into actual health care delivery... and that is the best news.

Financial reform has its heart missing. I hope to see better reform. Otherwise, we are back in the pre-2008 days with pretence of reform.  Whoever sees that will feel very nervous.  The market cannot be predicted.  And, credit will continue to be dry as long as the financial sector is not reformed.

-- Edited by Sanders on Tuesday 6th of July 2010 08:38:02 AM