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One Created Job
To start to understand the process, swing by HomeAway's downtown Austin headquarters. This is where, sometime in the next nine months, a marketing manager will show up for his first day of work at one of the economy's newest jobs.
The story of how this job will come to exist starts five years ago, with one man's frustration at how hard it was to find and rent a beach house for his family vacation. Brian Sharples, who was between jobs at the time, didn't understand why he couldn't go to a single website as he would go to Expedia for airline tickets to find a comprehensive list of houses for rent. So, with a business partner, he started such a site. Five years later, the company has $120 million a year in sales, employs 600 people in five countries and is ramping up its marketing push to grow even larger. That's why it needs a new marketing manager in Austin.
HomeAway is hiring for a very simple reason: people who own houses and want to rent them out are happy to pay $300 a year to have the company spread the word which it did in a Super Bowl commercial. "Jobs get created by providing a product or service that's better than what's out there," says Sharples. "There was an existing market for vacation rentals, and we've created efficiencies in that market. Now that it's cheaper and more efficient, more people are doing it, and the market is expanding."
In other words, to create jobs, start by creating something people are willing to pay for.
That's not as self-evident as it may sound. There is no shortage of theories about why companies aren't adding jobs faster. Banks won't lend to enable them to expand. Extra workers are too expensive because of taxes and health care costs. But the real clog in the nation's job-creating machinery is much more basic: a lack of demand for goods and services.
Just ask small businesses. American Express did that in a January survey, asking, What would most spur companies to go out and hire? An increase in customer demand, according to 42% of the respondents. Tax credits and better access to loans trailed, at 11% and 5%, respectively.
To see that dynamic in action in Austin, cut diagonally across the street from HomeAway and pop into the headquarters of Whole Foods. For a decade, the upscale grocery chain saw sales grow at about 20% annually. Last year, sales barely budged up 1% and the 30 stores that executives planned to open around the country were trimmed to 15. Those 15 stores added nearly 4,000 jobs just half as many as would have been gained had people kept buying organic peppers and salted caramels at the same pace. "There's too much thinking about how to create jobs," says James Manyika, a director of the economics-research outfit McKinsey Global Institute, "and not enough about how to create demand."
Why is that? Well, focusing on demand is a tricky thing to do. For decades, the economy's engine of demand has been American consumers a population now overindebted, underemployed and endowed with a newfound sense of thrift. The explosion in credit-card and home-mortgage debt before the recession tells us the demand that was there was never sustainable. This is why the President now talks about doubling exports over the next five years and the importance of passing trade agreements with countries like South Korea, Panama and Colombia. If we can't sell to ourselves, there is at least partial salvation in selling to others.
It's also the reason the job-creation bill passed by Congress includes an accelerated tax break for companies buying equipment. Companies that sell equipment need people to build it, and companies that buy equipment need people to run and maintain it. Many firms outside of financial services have surprisingly solid balance sheets, Manyika points out, and might be wooed into investing sooner rather than later. That would drum up sales for the firms they'd be buying equipment from.
That prime-the-pump logic is also behind the use of the government to create demand what we know as stimulus spending. Last year's $787 billion American Recovery and Reinvestment Act has received its fair share of criticism for funds being dispersed too slowly and for not doing enough to stem unemployment. But in Austin, Bruce Matous has a different point of view. "This saved my family business," says the president of Matous Construction.
Matous is referring to a $28 million contract to upgrade the Hornsby Bend Biosolids Management Plant, a city-owned facility that recycles sewage sludge and yard clippings into lawn fertilizer. The city desperately needed to upgrade its 1980s-built anaerobic digesters (you can see the foam insulation chipping off) and now has the money to do so, thanks to a 30-year interest-free loan from the federal stimulus package. To get the project funded, the city applied to the Texas Water Development Board, which had been handed stimulus money by the Environmental Protection Agency.