Mixed Economy

Theory and History seem to indicate that the economy moves in boom and bust cycles. In fact, the last few years have seen a raft of positive, apparently unending up-trends in wealth growth and jobs, encompassing high rates of employment, productivity increases and unfettered consumption.

This in spite of the doomsayers who have been calling out for a global financial crisis and overall recession in view of some macroeconomic imbalances (chronic account deficits, cost of credit, take up of environmental concerns). If it happened, the down slope of the cycle would kick in, as it has in the past.

I am somewhat inclined (maybe given my training in neo-classical economics) to think that sooner or later, things will need to cool off. That or we need to relearn how to interpret the global economy, and goodbye to our hero Dornbush!

My money is therefore still on the cycles' theory, with a proviso: not all areas of the economy will follow a common pattern, but will respond to its own particular dynamics

More specifically, I venture that labor (employment rates) and its price (wages and salaries) can remain strong in the context of possible economic chilling. The reason for this phenomenon, as hinted, would respond to labor's own influence variables:

Labor supply trends will remain unchanged due to:

* Continued friction in the international labor transfer (e.g. international candidates) due to immigration policies, recruitment practices.

* No imminent sign of skills and experience shortages being attended to (training, mature worker hiring still not making a huge dent yet)

* Individual job seekers continuing to search for suitable work-play equation (more time at home, self-employment)



Labor demand trends would also remain fairly constant due to:

* Unchanged demand for skills driven out of the demographics landscape in the developed world (health, social services)

*Knowledge and Services based economies still requiring people in the related professional slots - financial services, technology infrastructure. Otherwise, do you see Accenture, IBM Global Services or Deloitte’s laying-off consultants en masse?

*Emerging employment opportunities in new industries, boosting new areas of specialties and skills sets

It certainly may all come down to the extent of the recession/stagnation. I am sure there is a tipping point where labor demand will shrink from government and business as a way to avoid permanent collapse. But as we open 2007 I am feeling bullish about employment expectations given its driving forces.

This landscape in turn, will assist in the uptake of services and tools intended to help organizations source and engage talent, such as SEO for Internet recruitment. Consistent with this – and here’s prediction’s time – employers in ’07 will deepen their knowledge and increase their activities in human resource planning, as a way to meet their talent demands from their own operations context.

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