john-schoen

John Schoen in chat: Are massive layoffs over?

Nov. 5, 2010 at 2:49 PM ET

Labor Department released it's monthly job numbersQuestion from Sara:

Do you think we are done seeing massive layoffs?

John's answer:

It certainly looks that way. The big wave came when the bottom fell out of the housing and financial markets in 2007 and 2008. Companies shed jobs faster than they have in decades because the outlook was so grim. Since then, they’ve managed to keep up with demand by increasing productivity – squeezing more work out of the same number of workers. But there are limits to how much harder we can all work. That’s one of the good signs in this week’s data: the number of hours worked continues to go up. Which means some of that overtime may soon turn into full time jobs. Question from Greg:

How come there is so little talk of destroyed consumer spending demand? Do you really believe that consumer spending will drive our economy once again in the next decade like it did before? Would you think that (spending by borrowing even more than they can afford) is a good idea for individuals or families alike? It seems like like the government wants people to just spend today and ignore their future well being to me. Please explain how the economy can get going with it being on the backs of consumers (who are ever increasing their debt load)? John's answer:

Well, the economy can’t get back on its feet *without* the consumer. Consumer spending – though a bit lower as percentage of GDP than it was during the housing boom – is still about 2/3 of GDP. One important reason that consumer spending hasn’t cratered is that the government has extended unemployment benefits for up to 99 weeks. Those monthly checks usually don’t fully replace a lost paycheck. But they’re better than nothing. Consumer spending doesn’t need to do all the heavy lifting. Export growth is one area that shows promise – especially as the dollar has weakened. Business investment has been surging lately – as companies use record lowinterst rates to borrow and replace equipment they’ve been holding off replacing.

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