The current weakening of the labor market reflects a slowdown in hiring -- not the mass layoffs that have characterized past economic downturns.
The Labor Department said there were 1.8 million layoffs in December, about the same number as in December 2006 -- despite the mounting turmoil in the meantime in the housing, mortgage and finance markets.
Andrew Tilton, senior economist at Goldman Sachs Group, said the absence of large-scale layoffs partly reflects companies' uncertainty about the economic environment and their determination, at least for now, to hang on to their skilled workers.
"It's really in finance and housing -- and to some extent retail -- where the pain is being felt most clearly," he said. "Many other sectors aren't feeling pressure [yet] to lay off workers [and] are hesitant to let them go if they'll need them back soon," should the economy recover, Mr. Tilton said.
In the first article on this idea I put forward the following thesis.
1.) Overall job growth during this expansion has been incredibly weak.
2.) Yet productivity growth has been incredibly high.
3.) Putting these two facts together, I put forward the following thesis:
Let me throw the following hypothesis out: employers were far more reluctant to hire this expansion. Instead, they hired less but increased their productivity more. As a result, their business models are now wedded to a higher-productivity/lower workers total model. This means businesses can't cut jobs like they would in previous expansions because they would lose valuable employees. In addition, this would negatively impact the increased productivity of their respective businesses, which would have a ripple effect through their respective business
While I am not sold on this idea yet, it does appear that some economists have come to the conclusion that drops in employment won't be as pronounced during this slowdown as in previous slowdowns.
2 comments:
I think you are spot on in your central thesis here.
This has been the most anemic jobs expansion since the great depression. For the slowdown to take place, you don't need much in the way of additional layoffs (although we might get them anyway), you just need to stop further hiring. That's what we saw in 2007, that was enough to bring on the slowdown.
The jobs being "lost" or more aptly the people being "underemployed" in this current downturn are not the traditional workers with a fixed job structure. Mortgage banker staff, realtors, stock traders, etc. are more likely to be independent contractors. If you were making $200,000 as a real estate agent two years ago and only made $10,000 last year, you are still counted as "employed" or considered the proprietor of your own "nonemployer" firm. You are not part of the formal statistical decline, but you are in the same financial straights as someone who is formally laid off from their job. Here again the statistics do not tell the entire story.
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