Thursday, October 1, 2009

Corporate layoffs have all but vanished (4)



Another update in a series. It is now clear that corporate layoff activity (mass, announced layoffs at the corporate level) has subsided to levels that one might call "normal." From this we can infer that corporations have essentially completed their recession-induced downsizing. They are now "lean and mean" and the next shoe to drop—probably later this year or early next year—will be a resumption of new hiring in response to a pickup in business. Having cut labor costs, companies are also likely to enjoy higher profits as business picks up.

3 comments:

MW said...

Isn't the next shoe to drop a pickup in hours, before hiring resumes?

356-930 said...

You write, ". . . I don't seen [see] any deterioration in the fundamentals of the economy. Money is abundant. . . "

From US congressman John Campbell's newsletter of same date:
"Just the facts on the Fiscal Year End: The 2009 fiscal year for the federal government ended 2 days ago. The deficit through the first 11 months was $1.4 trillion, 43 cents of every dollar spent was borrowed, and the national debt is now $11.77 trillion which is a 35% increase since . . . 2006."

Unprecedented. One word to define one (last) fiscal year's borrowing.
No problem, provided the borrower has the capacity, intent and character to repay the debt.

You write, ". . .money is abundant. . . ." How much of that “abundant money” is borrowed money? At some time, it has to be returned, with interest.

The government shows no signs of checking its spending. In fact, it's clearly on a mission to spend ever more $$$. No problem, the Federal Reserve can simply print more, add the printing to the national debt.

Does the US economy have the capacity to pay off its massive and unprecedentedly fast growing debt? Does the US government have the intent and character to pay its financial obligation?

You don’t see any deterioration in the fundamentals of the economy? To remain positive, let me say I wish I could agree. But. . . .

Scott Grannis said...

I'm not saying that debt and deficits are a good thing. But even though the deficit this year is gargantuan, there is no reason to think it spells doom. Consider that the government is able to sell almost $2 trillion worth of bonds for the measly interest rate of about 3%. That tells me that the demand for government debt is as huge as the debt itself.

There are precedents for debts of this size, and again they don't spell doom. The worst thing about these debts is that they are occurring because government spending is soaring. As the government consumes more and more of the economy's resources, the economy will weaken. We will most likely have sub-par growth for many years as a result of this.