Commercial lending continues to chug along, according to the latest data from the Federal Reserve. That’s an encouraging trend when other economic news warns of sluggish growth or worse. But in a sign of the times, more lending isn’t translating into more jobs.

“Our loan growth this year has been robust,” says Mark Watkinson, the head of commercial banking for HSBC Holdings in North America, via MarketWatch. “Our month of July, for example, was the best month for loan growth this year. August was also strong.”
But the connection between loan growth and job growth isn’t obvious. Indeed, the dollar value of commercial and industrial loans jumped 1.7% in August vs. the previous month. That’s the fastest monthly increase since the recovery began in mid-2009. The annual pace of C&I loans looks strong too, advancing more than 6% in August compared to a year earlier—the fastest rate since the recession ended.

But the revival in lending has coincided with a downshift in job growth, as the dismal August employment report shows. This disconnect between loans and jobs is unusual, like so many other ills on the macro front these days. What’s behind this strange coupling?
Matthew Rieker’s Marketwatch story offers an explanation:

The reason the lending isn’t putting much oomph in employment is that the lending is largely to replace machinery and make repairs and upgrades, as exports are boosted by the falling dollar. Little of the lending is funding the kind of expansion of business that would generate robust hiring.

Businesspeople “have come to a point where they have to spend money to replace infrastructure… that they have put off for the last two or three years,” said Michael Slocum, head of commercial banking at Capital One Financial Corp. COF +0.12% , where loans to midsize businesses rose 6%, to $11.4 billion, in the second quarter.

The numbers for business investment certainly don’t contradict that view. Capital spending (nondefense capital goods orders excluding aircraft) rose by nearly 12% for the year through July. That’s a strong pace, although in the absence of employment growth it’s questionable if it’ll continue. No wonder that President Obama is again focused on job creation. Predictably, his renewed interest in the biggest economic problem in the country seems to be helping his poll numbers, at least for the moment.

Passing laws and minting fresh incentives is one thing; convincing companies to hire is going to be a much tougher nut to crack. Capital spending, meanwhile, doesn’t seem to be all that relevant for job creation these days. A new Duke Unviersity/CFO Magazine survey of chief financial officers reports that business spending is expected to rise at a slower but still respectable 4.5% rate. But that outlook is coupled with plans in corporate America to hold on to cash amid a forecast that employment will rise by a tepid 1%.
What’s the solution? Perhaps it’s time to think outside the box (or outside the country for those who need a job NOW.