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> -----Original Message-----
> From: Daniel Goncharoff [mailto:thegonch@xxxxxxxxxx]
> Sent: Saturday, September 21, 2002 9:37 AM
> To: realtraders@xxxxxxxxxxxxxxx
> Subject: Re: [RT] 10 year note near 40 year highs ?
>
>
> I think there are two sides to this point. Isn't a service-based economy
> more flexible than one based on large factories? It may mean that
> changes come more easily, and that new industries can develop using the
> excess information-based labor from weaker sectors.
>
> In this respect, telecoms will be a good real-life example. It will be
> interesting to see what happens to all the people getting laid off by
> the telecoms firms that won't be growing for several years. If they end
> up having no place to go, that would indicate your believe is validated.
> If they find new jobs in a similar field, I think the economic hit will
> not be very big at all.
>
In this week's Business Week, there's a rather disturbing article that refutes
the theory that a service based economy should be more resilient. Excerpts
below:
SEPTEMBER 30, 2002
NEWS: ANALYSIS & COMMENTARY
The Educated Unemployed
The jobless rate for managers and professionals is likely to rise
[...]
Here's why joblessness is likely to rise: Across the board, companies are
facing an unholy trio of low profits, weak demand, and falling prices--with no
relief in sight. Revenues for the companies in the Standard & Poor's 500-stock
index are down 2% over the past year, adding to the pressure on businesses to
cut costs by cutting workforces. At the same time, productivity is soaring at a
rapid clip--a 6% gain over last year at nonfinancial corporations. That's
allowing businesses to meet flat demand with fewer workers.
Even more distressing, some of the sectors where the job market has stayed
relatively strong--including health, education, finance, and retailing, which
together make up about 40% of the total workforce--are showing signs of
cracking. And the already grim labor picture in the airline, energy,
technology, telecom, and media sectors--some 7% of the workforce--keeps
deteriorating.
[...]
This is the dark side of the productivity boom. During the second half of the
1990s, output per worker rose, but soaring demand and revenues, driven in part
by the technology and telecom boom, helped boost hiring and push down the
unemployment rate below 4%. Wages and bonuses soared, and it seemed like a
golden age for workers.
But rising productivity without rising demand is a recipe for disappearing
jobs. If companies can't raise prices, the only way they can boost profits is
to cut workers--and higher productivity makes that possible.
[...]
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