Smarty_Pants

Labor Markets Face Slow Recovery

Many businesses have to endure severe cuts to weather a recession. In addition to cutting labor, other areas are also cut or ignored. Perhaps the businesses have to borrow to delay the expenses and keep the doors open.

When recovery sets in these delayed expenses need to addressed and the business might want to build up a cushion of capital again before spending on expansionary efforts.

After all, if you have been out of work for 6 months and finally got a job would you rush out and buy an expensive sports car upon receiving your first paycheck, or would you be more likely to use it to repair the problems you've ignored on the junker you're driving now and try to save some money for the next rainy day?

Financial pain tends to re-prioritize the areas of spending to the absolute necessary first. Businesses will look to tend old wounds before they look to grow new markets. When recessions end, the delay in new hiring will lag until improving demand requires the expense.