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Optimism in a recovery full of job cuts?
A man looks at his pink slip
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TEXT OF STORY
Bill Radke: Strange, isn't that? The stock market is up. We're talking about strong earnings and economic recovery, and yet Sprint says it's cutting another 2,500 jobs; Pfizer, 2,000 jobs; the video gamer Electronic Arts is cutting 1,500 jobs. Those announcements are just from this week. We asked Marketplace's Stacey Vanek-Smith how there could be optimism with no jobs.
Stacey Vanek-Smith: Last quarter was full of good earnings reports, and the job cuts just keep coming.
Tom Higgins is chief economist at Paydon and Rygel Asset Management. He says companies have slashed work forces to cut costs, but things will turn around soon.
Tom Higgins: Companies have probably laid off too many workers. Once the recovery does start getting traction, then companies will start hiring back some of these workers.
But that doesn't mean employment levels will go back to where they were says Jack Ablin, chief investment officer for Harris Private Bank. He says the recession is winding down, but we're in a new economy.
Jack Ablin: We as a nation have spent more than we've earned consistently for nearly 10 years. We grew an economy that was just too big. Too many vacations, too many autos, too many Starbucks coffees. Too many jobs unfortunately.
Ablin points out the U.S. has lost 7.5 million jobs since the recession began. He says it could take nearly a decade for those jobs to come back.
I'm Stacey Vanek-Smith for Marketplace.
While many people continue to lose their jobs most top executives have managed to stay put and keep their positions while they continue to layoff their employees. Despite a number of very high profile CEO and other high level turnover most top executives have seen little turnover. This information is from Liberum Research, the executive management tracking service. Liberum expects once the economy actually gets better executive turnover will begin to increase.
Rising equities markets and rising U.S. unemployment shows that the term ‘the economy’ glosses important differences in social welfare, similarly with other terms like ‘the recovery’. The credit crisis and the government’s responses are widening income gaps that have been more or less widening since 1913 (Cf. ‘Income Inequality in the United States, 1913-1998’, Emmanuel Saez and Thomas Piketty, http://elsa.berkeley.edu/~saez/).
If there’s one thing overpaid executives know how to do it is cut costs. Whether Americans will fill lost jobs and where economic growth will occur are different issues. “Demographic trends aside, the global labor market changed greatly in the 1990s due to the addition of China, India, and the ex-Soviet bloc to the world economic system…changing the balance of labor and capital in the global economy.†(Labor Market Imbalances: Shortages, Surplus or What?, Richard B. Freeman, http://www.bos.frb.org/economic/conf//conf51/conf51d.pdf). This has led to offshoring American jobs and importation of foreign workers at lower costs. If Alan Blinder is right (‘Offshoring: The Next Industrial Revolution, http://www.foreignaffairs.com/articles/61514/alan-s-blinder/offshoring-t...) these are significant trends.
One clue to where employment opportunities will likely occur is in the financial sector. “From 1973 to 1985, the financial sector never earned more than 16 percent of domestic corporate profits. In 1986, that figure reached 19 percent. In the 1990s, it oscillated between 21 percent and 30 percent, higher than it had ever been in the postwar period. This decade, it reached 41 percent.†(The Quiet Coup, Simon Johnson http://www.theatlantic.com/doc/200905/imf-advice).
