Friday, November 13, 2009

Lingering Recessionary Worries

Rogelio Ramírez de la O explains why the renewed growth in Mexico isn't all good news:
[T]hose who work less than 35 hours a week grew by 2.2 million [in the three quarters ending in June 2009]. And those who are not economically active but are available for work rose by 732,000. Finally, the underemployed grew by 1.9 million. The sum of job losses and underemployed in a in these various categories grew by 5.1 million, in an economically active population of 45.7 million. There is no doubt of the drop not only in employment, but in the social conditions of the majority.

As sales fall businesses lay people off or reduce the hours of those on staff, they learn to do more with less. Those who hold on to their job will work harder and undertake jobs that before they did not, which obviates the need for new hires in the new cycle.

For businesses to hire more people their sales need to increase a lot, because with any modest increase they will go about business with the people they already have on hand.

So once there is a rebound like the present one, which in market lingo is known as the dead cat bounce, in 2010 the level of activity, still greater than that of 2009, will probably not have enough of a rise that it's even worth mentioning, because the tax increases and public prices are going to more than get rid of the purchasing power for businesses and consumers.

No comments: