Will the Recovery Be Jobless?

Businesses can do more with fewer employees—that delays job growth.

Steve King
Steve King

The U.S. economy shrank only 1 percent in the second quarter, which is better than most economists expected. This has led to a number of economists bucking the consensus view that the recovery will be slow and feeble. Instead, they are predicting a V-shaped recovery with robust economic growth starting this fall.  

But even if the optimists are right and the recovery is strong, we expect that traditional job growth will be weak.

In this highly uncertain, competitive, and volatile economy, companies are hesitant to add full-time staff. Instead they are looking to contractors, outsourcing arrangements, and business partners to provide flexible workforces that quickly and easily scale up and down in response to business change.

Technology is making it much easier to manage contractors and part-time workers. It is also allowing firms to do more with fewer employees. And recession-driven cost cutting and business process redesign are increasing productivity and reducing the need to add full-time staff as business picks up.

It's not just large corporations making these changes. Small businesses are also using contractors, technology, and outsourcing to reduce the need for full-time employees.

These trends are not new. The same broad shifts resulted in both the 1991 and 2001 recessions ending with what economists call a "jobless recovery" because of slow post-recession job growth.

The impact of these structural economic changes on the workforce will grow. And while an economic recovery will make it easier to find work, traditional full-time jobs at both large and small companies will continue to be hard to come by.

Steve King is a partner at Emergent Research, where he leads an ongoing research project to identify, analyze, and forecast the global trends and shifts affe cting small business. He blogs at www.smallbizlabs.com.