Will There Be Another "Jobless Recovery"?

Lunch conversation with some of my work mates last week was on the issue of hiring.

People were hoping that with an uptick in holiday spending more people would be hired to help out with the work. Folks are tired from working long hours through the summer and into the peak Christmas season. Even part time workers have been pressured into cranking up their hours. Yes, it's good for paying the bills, but hard on the families--particularly parents that do not have much flexibility with childcare arrangements.

My friends were hoping that the company would hire some of the temps brought on for the seasonal rush as permanent full time employees.

My guess is that they will not.

Why do I think that? History.

The bounce back from recession of the early '00's has been called "the jobless recovery". Economic activity increased but hiring did not.

The company that we work for is a good reflection of what goes on in the country at large.

During the recession of the '00's sales remained flat. To increase profits the company decided to increase market share--to go out and grab business from their competition.

Before this time labor costs--the wages and benefits that workers receive--had made up more than half of the company's annual budget. The company decided to bring labor cost down and shift their budget toward marketing and advertising.

They made this shift by laying off employees, increasing production quotas and decreasing benefits for those who remained.

After the layoffs the budget for advertising and marketing was well over 50% and labor costs were well below 50% of the budget.

Accrual of vacation and sick pay was reduced. Employees picked up larger percentages of health insurance costs.

The government reported in the next year that US productivity increased but that families were working longer hours to maintain the same standard of living which they had previously enjoyed.
That was no surprise to me. That was what I and my fellow employees were doing.

This trend has continued through the current period. All of this is consistent with "supply side" economics as advanced by the Regan administration in the 1980's.

The widespread corporate strategy of laying off workers of course did nothing to stimulate the economy. Though some of our competitors went out of business, company sales remained flat.

As the economy increased a little in the middle of the decade economists began to worry about "the jobless recovery". They knew that a strong recovery could not happen without either an increase in wages or an increase in employment and neither was happening.

This still remains a concern of most economic analysts.

Will the recent increase in sales and profit cause our company--and others--to hire new employees?

Most stockholders are looking for larger profits and more return on their investments to make up for their losses in the Great Recession of 2008-9. There is still great fear about the future of the economy.

Companies will be much slower I think to hire.

What incentive to they have to hire? With unemployment high labor costs are low--they have a pool of people desperate to work under any conditions.

I think companies are going to play it conservatively--still shifting their attention toward increasing market share, being competitive, rewarding stockholders and reducing labor costs.

Yes, hiring would stimulate demand and lift the economy but what corporate leader is going to go down that road? Our current version of capitalism encourages the short-term gain over the overall good.

In fact a report today reveals that US companies have created more jobs overseas than they have domestically. Labor is cheaper there and with the infusion of new cash flowing into foreign investments the rate of growth of those economies exceed that in the US.

This does not bode well for the worker or for the economy. The gap between the wealthy and the working class will continue to grow until we whose labor generates those profits organize and demand a greater share of the wealth which we create.

Will there be another "jobless recovery"? I do not think such a thing is possible.