Academic journal article ABA Banking Journal

The Other Shoe Drops

Academic journal article ABA Banking Journal

The Other Shoe Drops

Article excerpt

PAYROLL GROWTH SURGED AT a 300,000-plus pace in the month of March, buoyed but not defined by outsized gains in construction and the return of striking grocery store workers. Gains were widespread with the one-month diffusion index (measuring the breadth of employment gains) surging from fifty-one to sixty-one percent. Even the manufacturing sector showed signs of stabilizing, with no net change after 43 months of job losses.

Perhaps even better news is that payrolls for both January and February were revised upward, suggesting that the rebound in job growth that began last fall was real. The recovery is clearly becoming more rooted and gaining traction.

All of the pieces are falling into place for greater job-generation in the second half, with risks mounting on the upside that we will see some outsized gains this summer:

* Domestic demand continues to recover, providing the basic need to hire; and,

* Production is picking up, but not enough to replenish inventories, adding to that need.

At the same time:

* Profits and corporate cash flow are at a record high, providing the means to hire; and,

* Employment costs have dropped with the recent rise in productivity growth, making it less costly to hire.


* Layoffs have abated, with unemployment claims dropping sharply from a year ago;

* Hiring plans are on the rise, especially among small businesses; and,

* Confidence among CEOs surged to its highest level in two decades in the first quarter.

This is in sharp contrast to a year ago, when firms still had few (if any) plans to hire, and downsizing was prevalent. …

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