Look at that.
Bit by bit, the consensus of ‘L-shaped, jobless recovery’ is starting to crumble, as more and more are calling for a V-shaped comeback.
Last month, for example, Barclays strategist Tim Bond presented his case, arguing that the v-shaped recovery was well on its way in Asia, that people underestimate how fast economies can recover, and that employees were too aggressive on cutting jobs.
Now more are buying into this idea that job cuts went too deep, and that businesses will have to compensate.
WSJ: “Firms were unusually aggressive in cutting costs and cutting employment,” said James O’Sullivan, an economist with UBS. “The flip side of that remains to be seen, but it could mean that companies will be quicker to bring back people because they were more aggressive about getting rid of them.”
Businesses say they are running lean. Philadelphia staffing and outsourcing company CDI Corp. has seen demand for its services fall sharply in response to the recession. Its engineering services business, for example, has seen a 22% drop-off, said Chief Executive Roger Ballou. But the company has cut staff deeply enough that it doesn’t have many idle hands, and Mr. Ballou said that’s true at CDI’s customers as well.
“I’m unaware of any firm out there today that has lots and lots of people sitting on the bench, waiting for business to come back,” said Mr. Ballou. As a result, he thinks jobs will come back more quickly as the economy recovers than they did in 2001.
Elsewhere, John Hempton recently argued a similar point, that inventories had been drawn down to such an extreme degree, that the business recovery had no other direction to go other than a straight up spike. He walks through the example of boatmaker Brunswick to show just how little slack there is in the system now.
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