Governments may mediate the conflicting forces that prompt organizations to downsize, but they abort the fundamental dynamics at their peril. The collapse of communism is a recent example. While corporate downsizing gets the headlines, the American economy has quietly grown richer. The public has confused downsizing with recession. Downsizing affects a single industry that is trying to accommodate itself to new realities of the market.
Recession affects all sectors of the economy.
While some industries have downsized, the economy has continued to be robust, so much so that the Feds keep the brake on to keep it from overheating and setting off inflation. More than 8 million net new jobs since 1992 has put our unemployment rate at an historically low 5.5 percent. In the past 25 years, U.S. employment has increased 59 percent and we have created more than five times as many net jobs as all the countries of Europe combined. Firings are up but not as much as the rhetoric about them. A study by economist Robert G. Valletta of the Federal Reserve Bank of San Francisco finds that firings now account for about 40 percent of unemployment compared with 35 percent in the early 1970s.