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Economic “recovery In The US Takes A Weird Turn

HeroicInvesting.com

HeroicInvesting.comThe first thing we’d like to suggest is that if you have a job, keep it. Don’t do anything silly to get yourself fired, especially if you have a family to support. We offer this warning because the economic recovery in the United States has taken a weird turn. While it’s true that our economy is turning around, becoming more productive at a faster rate than our competitors around the globe, there’s one thing odd about it. Jobs are not being created at an accompanying pace.

How is that even possible? Doesn’t the very notion of an economic recovery imply that jobs are being created? Economists used to think that but we’re learning that companies can increase productivity and profits while hiring far fewer workers than would have been thought possible given the 7.5 million that have lost theirs since the recession began.

Strange but true. Measured in growth, America is outperforming Britain, Germany, France, Japan, Italy – actually every member of the Group of 7 except Canada – but our job market remains the weakest because employers aren’t acting like economists expected them to. It used to be that companies were loathe to resort to wholesale layoffs during a recession. They would cut a few here and there but keep more than they needed and give them make-work jobs like sweeping the factory floor. But this most recent recession, and the complete panic at the sheer size of the unfolding financial crisis, scared employers like they had never been scared before, and they reacted by slashing jobs left and right.

The funny thing that happened was they found that their business operation could still be productive, actually MORE productive now that the weak workers are gone. So now business is coming back, profits are up, productivity increasing without hiring more workers. We might be dense but where’s the incentive to pay people to do jobs that are being handled well by current staff already?

One conclusion could be that businesses had gotten fat and lazy and were carrying a payroll far too bloated to be sustained. Maybe the recession was a reminder to these CEO’s and hiring managers – lean and mean beats fat and bloated in capitalistic pursuits. If that’s the case, the US economic recovery may have a lot more heating to go before business is convinced it should start hiring again.

The Heroic Investing Team

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