Tuesday, March 27, 2012

Hiring More Workers Can Make Sense

Two items in The Week (March 30, 2012, page 44) by Robert Samuelson (Why we need busts with our booms) and James Surowiecki (When hiring more workers makes sense) are useful in understanding the place in the recovery we have reached.

The causes of the recession were the interactions of Wall Street bankers taking too much risk, Washington’s overzealous push of homeownership, and consumers spending too much on credit. Debt exploded, lending standards softened, and oversight melted: it wasn’t too many regulations; the ones in place weren’t enforced. It follows a pattern repeated often in the world economy, the 2000 tech bubble, for example. In the US the Federal Reserve helped to minimize damage.

The unfortunate aspect of such patterns of boom and bust is that economists still haven’t been able to forecast them well enough. Yes, in the recent problem, some now step forward claiming they had done so, but unfortunately, there are analysts who tell us one is coming, while others tell us it won’t. The modeling isn’t precise.

What some companies have found is that it is a good time to increase sales forces. Costco’s, Trader Joe’s, Quip Trip, and Mercadona markets have realized gains of from $4 to $28 in new sales for every dollar in additional payroll. People want good service and are willing to pay for it.

The recovery has brought GDP back, higher productivity, and rebounding stock markets. The major problem we still face is unemployment. The recession was deeper than first imagined. Job growth, while on a par with earlier recessions, will still require retraining to new market needs, and the creation of new fields requiring new skills. In addition to sales, whole new industries must be built.

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