News coverage of financial and economic events is beginning to resemble a TV reality show in some respects. This morning, after the Dow plunged 1,000 points and rebounded about half way yesterday, I awoke to a news radio report that "a typo in a transaction" might have precipitated the free fall. So key word auto scans of trades or an erroneous transaction can cause this degree of turmoil? Not on their own they can't, or it would happen constantly. Pernicious hedge fund designers aside, Global markets have the jitters for a plethora of reasons. Not the least of which is desperate striving for gains in output without staffing up for longer term infrastructure development in R&D and other strategic pursuits.
This morning's WSJ claims that "The manufacturing sector, which has been recovering fastest from the recession, offered the most obvious example that it was getting tougher for businesses to do more with less: Productivity at factories rose at a 2.5% annual rate in the first quarter, while output climbed 7.5%. However, hours also went up 4.9% as firms accelerated hiring to sustain the output boost ... [and] While productivity growth is a boon for profits, it restrains employment and incomes. At a certain point, economists say, soaring productivity has to slow as companies step up operations ..." Or as Nigel Gault, IHS Global Insight economist, is quoted: "Companies are still trying as hard as they can to achieve output gains without adding to their work forces ... It's getting more difficult to do that." Let's all meditate on that this weekend.
To paraphrase Sting, the days of money for noth'n and growth for free without significant investment in mind share infrastructure are long gone. It's time to hire and rebuild our corporate brain trusts. It won't make for much of a reality show, but it will surely help to build a real recovery.