Good analysis of jobless recovery
Christian Science Monitor today reports: “Why hiring languishes even as economy gains.”
Summary: “multiple factors are at work, some of which could affect the shape of future economic cycles as well.”
1) “Economy’s growing orientation toward services . . . [which] can soften the blow of recessions, as people continue getting their hair done and seeing healthcare providers in bad times. But service industries don’t tend to hire en masse during a recovery.”
2) “Corporate executives appear more likely than in the past to lay off employees permanently, . . . and are not as prone to hire them back again. Thus, new job growth may increasingly depend on the rise of new firms and industries, and less on rehiring at older firms.”
3) “The mildness of this recession.” “Stimulative policies such as interest-rate and tax cuts helped keep the recession short . . .. Low-interest rates meant that the housing, consumer durables, and auto industries were able to maintain strong sales throughout the slump. Thus they had little room to bounce back in the recovery, as would be normal.”
4) “Productivity gains. Employers are getting more output from the workers they already have, and thus need to hire fewer new workers. Workers’ output per hour usually falters in a recession. That didn’t happen in 2001. During recovery, productivity generally accelerates, but this time the pace appears very strong.” “In the long run, higher productivity is usually a boon to workers as well as to management, paving the way for higher wages and profits. But business may be slow to share the gains with their workers.”
5) “Job growth is also held back, some say, by the massive $500 billion-plus deficit in international trade.”
6) “Poor economic policy by the White House. The Bush tax cuts of $3 trillion over 10 years were badly designed . . . because they gave most of the benefits to the well-to-do who are less likely to spend it quickly than lower-income people.”
Christian Science Monitor business news is excellent and on my newsreader, and I will continue to include employment-related items from this source in this blawg.
