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Bob Nardelli: I would be very cautious about hiring right now

The unemployment rate is at its lowest level since April 2008, good news for sure. However, the labor force participation rate sits at the lowest level since 1977, and economic growth in the third quarter was an anemic 1.5%.

Labor Force Participation RateSource: Bureau of Labor Statistics
Labor Force Participation RateSource: Bureau of Labor Statistics

By another closely-watched measure, job openings have increased, but hiring remains stagnant. The Job Openings and Labor Turnover Survey (JOLTS) is a favorite of economists who consider an increase in the number of workers who voluntarily quit their jobs to be a bullish sign for the economy.

In the most recent JOLTS report, job openings increased to more than 5.5 million, but hiring continued to lag, with openings at 5 million. So why are companies apparently unwilling to fill those open positions?

Source: Department of Labor and WSJ.com
Source: Department of Labor and WSJ.com

Perhaps they share some of the hesitations of veteran executive Bob Nardelli. We asked the former CEO of Home Depot (HD), Chrysler (FCAU) and long-time General Electric (GE) exec if he would be hiring right now.

“If I were running a company right now, I’d be very, very careful in my hiring decisions,” he told Yahoo Finance editor-in-chief Andy Serwer at the EY Strategic Growth Forum in California. “Every day when these CEOs walk in, it’s kind of a throw the dice of: what are the external factors, what [are the global] issues facing you, the uncertainty?”

In answer to that question, Nardelli names the Fed and the prospect of higher interest rates as one of the external factors that could affect the consumer—the largest driver of economic activity.

In the auto sector, manufacturing has rebounded to pre-recession levels. Again, great news, but Nardelli says companies need to be careful not to over-hire at these levels because of the uncertainty that persists around economic growth overall and how the Fed may respond as soon as December.

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If energy prices rise, he says consumers could pull back on purchases of SUVs and large trucks, where automakers have some of their best profit margins.

“Like never before, I think a CEO today is challenged with the level of uncertainty and inconsistency in various sectors,” he said. “I would be, right now, very cautious.”

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