By now, everyone knows that employment is a lagging indicator. This cycle, however, the extent and duration looks to be deeper and longer than usual:
“Companies across the economy are holding off on hiring even as the profit outlook improves, amid economic uncertainty and their own success at raising productivity in rough waters.
Hiring always lags behind in economic recoveries, but the outlook this time is worse, many economists say. Most forecasters now expect a prolonged period of high unemployment, even though the government is expected to report next week that the economy grew in the third quarter, after four quarters of contraction. That is sure to frustrate the jobless and could be a problem for the Obama administration.
There are several major factors behind the trend, which is coming on top of sharper-than-expected job cuts in the recession. Many businesses have nagging doubts about the durability of the upturn, attributing much of the recent growth in orders to a move by their customers to rebuild inventories and to government stimulus spending, rather than underlying strength in their markets.
Businesses also face uncertainty about the potential costs of regulatory moves — such as an expansion of health care and climate legislation — that could drive up costs. And many employers have learned how to produce more with a smaller number of people than they previously thought possible.”
A “V” recovery looks increasingly far-fetched . . .
Chart courtesy of WSJ
NFP: Understanding the Lag (April 3rd, 2009)
Employers Hold Off on Hiring
TIMOTHY AEPPEL and CONOR DOUGHERTY
WSJ, OCTOBER 20, 2009