Comments on: Shoot First, Negotiate Later

By: Alfred

Alfred — Fri, 19 Jul 2013 16:07:29 +0000

I perceive that looking back on the “Great Moderation”, there is a perception [sic.] that this was a time when nobody was ever fired, no firm ever failed, a time when we turned on all the machines and stepped back. (An uncharitable view of Keynesianism would suggest that they favour fixing everything by turning all the machines back on).

The JOLTS data suggest a more Schumpeterian, PSST (if I understand correctly) view: “moderations” are not all that moderate or boring for individual firms. A boom differentiates itself from a recession by the existence of a thriving firm for every failing firm.

By: Lord

Lord — Fri, 19 Jul 2013 15:48:17 +0000

I think most of these happen, just at slightly different times. Employers first stop hiring. As hiring becomes difficult, employees stop leaving. Employers slow wage growth but that takes too long and is too slow during a recession so they quickly shift to layoffs, even anticipatory ones in an attempt to complete them in one pass. Once the bottom has been reached they start increasing wage growth along with productivity to keep their employees in place, happy and hardworking, and avoid hiring until they are past the point of no choice. Once hiring begins, the virtuous cycle re establishes increasing demand.

By: Arnold Kling

Arnold Kling — Fri, 19 Jul 2013 15:13:48 +0000

Indeed, the drop-off in new hires is larger than the increase in layoffs.

By: Arnold Kling

Arnold Kling — Fri, 19 Jul 2013 15:09:53 +0000

Those that survive layoffs have a bright outlook knowing that they survived with their standard of living intact.

Good point. Better a few motivated employees than a lot of disgruntled ones.

By: John Donnelly

John Donnelly — Fri, 19 Jul 2013 14:51:15 +0000

First, I’m a big fan of your blog. Second, I pick b) as the more plausible. I am employed in the auto dealership industry. I’m a CPA (BA in Econ from UCSD) and have 25 years experience in the general and financial management of this small business segment. Reflecting on past downturns in the economy it has always been pervasive in our business that we haven’t the time for slowing wage growth. Something must be done and done now. Also, and more importantly than the time aspect, wage reductions have a lingering effect on employee productivity that layoffs do not have. Those that survive layoffs have a bright outlook knowing that they survived with their standard of living intact. Victims of wage reductions don’t quite ever forget the slight especially if the cuts only hurt the rank and file; leaving management unscathed or still well paid compared to the rest. This “slight” hurts productivity and in retail that means reduced sales.

By: Alfred

Alfred — Fri, 19 Jul 2013 13:09:04 +0000

To add some data for anyone interested:
Private Layoffs and Discharges: http://research.stlouisfed.org/fred2/graph/?id=JTS1000LDL,#
Private Hires: http://research.stlouisfed.org/fred2/graph/?id=JTS1000HIL,#
These charts support Kling’s comments.