Economist: Productivity Shares Blame For Job Losses

Jan. 13, 2005
By John S. McClenahen Particularly among domestic-focused U.S. manufacturers, the outsourcing of jobs to China gets the headline blame for the largely jobless recovery from the 2001 recession. However, outsourcing is only part of the story, claims Ron ...
ByJohn S. McClenahen Particularly among domestic-focused U.S. manufacturers, the outsourcing of jobs to China gets the headline blame for the largely jobless recovery from the 2001 recession. However, outsourcing is only part of the story, claims Ron Wexler, an economist at Merrill Lynch & Co., New York. The other part: productivity, says Wexler, who does not specifically quantify the impact of either outsourcing or productivity on U.S. jobs. "Essentially, companies are now reaping the benefits of the strong investments they made in the 1990s, which allow them to reduce operating costs, i.e. employ [fewer] workers," he says. "Once demand picks up meaningfully and further balance sheet repair occurs, we should see companies open the purse strings and hire new workers," he predicts. "However, the dramatic rise in productivity has raised the bar for the needed level of demand."

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