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Why this recession is not like earlier ones September 19, 2009

Posted by fetzthechemist in Uncategorized.
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The slow recovery from this recession highlights two fundamental differences from it and earlier recessions. First, this is a “jobless” recovery. Companies started in the 1990s to get away from any thinking that employees were nothing more than a needed cost burden. Whenever there were mergers or reorganizations, managers learned to cut costs first by laying off people. In prior decades, cutting people was one of the last and most distasteful ways to save money. Not anymore (except in Japan).

The converse is also true. Hiring will now be the last thing a manager does when things are going well again. Even then, they will bring on contractors or people under temporary-but-for-eventual-hire. These are noncommital. They can be used to test new workers abilities, but also save money by ot paying any benefits.

The second difference is that we will not spend our way out of this one. Since risking spending on houses was one cause of the financial collapse, people have seen what debt beyond their means can do. The reliance on loans and credit card balances has been mollified. At least some people are getting away from them.

So without a rush to jobs and little spending, even when signs are positive, this recession shall drag on longer.

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