Coupled with low inflation and strong productivity growth, the tight labor market has also led to rapid real wage gains. Despite the outstanding performance of the U.S. economy, the year ended with a raft of reported mergers and acquisitions accompanied by announcements of planned job cuts. This is the highest number since 1993, which was the previous peak for the 1990s. Still, U.S. firms created a net of more than 2.8 million jobs between November 1997 and November 1998. More than 80 percent of these jobs were full-time.
Many analysts attribute job cuts to market forces.
Not only is that statement wrong with respect to the major reason for job cuts in the current vigorous economic climate, it is wrong in terms of the implication for staffing levels at firms that are undergoing restructuring. The fact is that market demand is now a major reason for hiring, not job elimination, and only 14 percent of large firms are eliminating jobs without concurrently creating new jobs. The best available data on hiring and job elimination by large companies come from the American Management Association's annual survey. Since the 1991 recession ended, the share of firms announcing job elimination has declined, although employment restructuring remains a prominent feature of the workplace. Accompanying this change is a dramatic decline in the average net workforce shrinkage among firms that are eliminating jobs, to about 0.5 percent.