Eclectic Memes

Here’s a thought. We keep hearing of job losses and these are interpreted by pundits as some measure of the health of the economy. This seems flawed logic to me.

Surely, the appropriate measure is how much productive work is being done, not by how many people this work is being done. I have no doubt that many organisations have used the economic downturn to justify shedding jobs that should not have been there in the first place. In economically good times these ‘fat’ jobs (the ones that a company can bear simply because the economy is healthy, not because they are necessary) are overlooked because there is no driver for anyone to look for fat to trim. Once the economy heads south everyone looks to remove this fat, so we see large layoffs.

As this fat trimming is completed, job layoffs bottom out. Fewer people are then asked to pick up any slack by doing more work to cover the inevitable peaks and troughs in workload that occur in any organisation.

Net result, few people covering the same work load as was covered before the fat trimming. (Of course businesses will see some drop of in workload, but as we shall see, this is a short term issue for most organisations.)

As the economy recovers the workload picks up. Do the organisations immediately start recruiting? No, of course not. They wait to see whether the recovery has any legs. So, the reduced head count are called upon to do more work than previously but the head count remains static. There is, in short, a hysteresis in the job market – the workload always leads the head count adjustments. So, paying close attention to the head count changes tells you very little about the actual state of the economy but does provide the media with a nice headline and some soundbites.