Sunday, April 3, 2011

The Profit & Employment Cycles

The New Normal crowd has been touting the notion that employment would remain depressed and that unemployment would remain chronically high for a long time. We have been arguing that there is a very powerful relationship between the profits cycle and the employment cycle. We’ve been predicting and tracking the surprisingly strong growth in profits over the past two years. We argued that the subpar recovery in employment was caused by all the regulatory meddling by Congress during 2008 and 2009.

Last year, we predicted a regime change in Congress on November 2. When that happened, we concluded that employment should expand at a faster pace because there was likely to be much less of an anti-business attitude in Congress. Payroll employment in private industry rose 182,750 per month, on average, from December through March. During the previous 11 months, it rose 91,450 per month.

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