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A Positive View of the Jobless Recovery

Anthony Randazzo
April 16, 2010, 9:40am

Reuters reported yesterday that the Fortune 500 companies tripped their profits in 2009 from the previous years level, to $391 billion collectively. Fortune magazine also noted that those same companies cut 821,000 jobs last year.

That is a jobless recovery if there ever has been one. And it may not be all so bad.

Okay, it is certainly easier for me (employed talking about unemployment) to sit back and philosophize about the positive signals in these statistics. But there is a legitimate argument to be made for how these numbers may be good.

The Fortune 500 companies achieved their increase in profits at the same that sales droped 8.7 percent in aggregate. However, companies were able to increase profits by cutting costs and laying off workers. In short, they were able to do more with less. Moving forward, those companies have probably learned ways that they can run their businesses more efficiently. In the future, when the economy starts humming again, those companies will hire again as sales pick up, but it is unlikely that all 821,000 will get their jobs back.

I seem to be digging myself a hole here right? Cause it is not yet sounding good. Well read on.

Now, though popular sentiment would be that people get their jobs back, why is that? Companies to do exist to employ, they exist to make products and offer services that are consumed by society. If the Fortune 500 can meet future demand with, say, 500,000 less workers, should we be upset? No. That would mean popular sentiment favors inefficiency. Is that the kind of economy we want? One that is inefficient for the sake of just giving everyone a job? Hardly.

But here is where I see a pretty significant positive going forward: all that labor is now available for something else. Prior to the recession, certain amounts of labor were locked up in inefficiencies. Now there is an army of people who are not needed for the nation to achieve the same productivity. This means they will be able to work in new industries, expand growing companies, and innovate in a 21st century marketplace. The economy could, as a result of this, be stronger than ever before, producing more, exporting more, advancing communities, the nation, and the world.


Anthony Randazzo is Director of Economic Research


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