By Anne D. Picker, International Economist, Econoday
Monday, September 10, 2001
The impact of the U.S. employment report on world markets was quite negative, reminding investors that the U.S. economy is still vulnerable. But there are a few things investors need to keep in mind as we go forward. Employment is a lagging economic indicator as employers are traditionally reluctant to cut employees at the first sign of weakness - especially so in the tight labor markets that existed last year. Announced layoffs don't always happen immediately, but can drag out for some time especially if attrition and retirement are used to reduce headcount. Large firms are also obliged to give notice prior to shrinking their labor force. When things improve, employment increases also will lag as employers want to be sure that the improved conditions warrant adding employees. In short, the jury is still out on whether the U.S. economy has begun to stabilize.