Sunday, September 13, 2009

Fewer Layoffs Won't Mean More Jobs

"Companies, still wary of weak consumer demand, aren't doing much hiring. The trend could keep unemployment high for the next year.

Businesses will remain hesitant to hire as long as overall demand remains subdued, and that is almost certain to be the case in the coming year. Spending in the U.S. and elsewhere stabilized last quarter, but the lion's share of growth in the second half will come from companies replenishing their depleted inventories rather than from a resurgence in demand. Plus, businesses remain keen on cutting costs and keeping productivity high. Productivity, measured as output per hour worked, soared at a revised 6.6% annual rate last quarter, and another big gain is on tap for this quarter."

Source: Business Week

Add to this issue is the structural unemployment issue. There are those in the camp that say that temporary workers will be hired back first because companies may want to test out their demand thesis for additional workforce. The problem is that many positions will never return. These are those that are affected by structural unemployment.

Employers currently in the United States have a lot of leverage in terms of their workforce. Those are still hanging onto their jobs may get increased hours which is currently at 33.1 hours worked per work week. Say if an employer needs more production, they can invite their current work staff to bang out more nuts and bolts. Hence, this will in my opinion continue to be a weak environment for hiring.

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