News Columns & Blogs

Cutting workforce too deep may mean no jobless recovery

Worker productivity rose 6.6 percent in the second quarter because companies cut their work forces a lot faster than their sales fell.  Apparently,  companies  didn’t wait to see how bad this recession would be and just started swinging their axes, leaving their remaining workers to manage somehow. That’s different than in the past when companies laid off workers only after sales started falling. That’s why jobs and the unemployment rates are  traditionally considered a  lagging indicator — the last thing to go down in a recession and the last thing to snap back.

That’s bad in the short run. Obviously, millions are unemployed, and tens of millions more are having to work harder to compensate. For companies , there’s rising profits from running extremely lean (and furloughing and cutting salaries and eliminating the 401(k) contribution and  etc.)

But there is a possible silver lining. Because companies cut quickly and deeply,  it may mean they rehire more quickly than they have in the past. Companies may not be able to have that “jobless recovery” because they’re already so thin.

  Comments