Labor data thus far in 2002 highlight the danger that a "corporate paradox of thrift" might unfold, which likely would create a need for prolonged highly stimulative policies and/or unusual public interventions to forestall severe economic difficulty. Pressure for corporate spending control remains intense, due to weak nominal GDP growth, thin profit margins, and increased capital costs reflecting tighter financial conditions. Headcount and compensation costs offer inviting targets for managers seeking expense reductions. Several indicators depict employment trends this year that are as poor or even weaker than in the "jobless recovery" of 1991-1992.
Especially noteworthy is an unusual stagnation in nonmanufacturing payroll diffusion, which shows that aversion to adding workers is far more widespread across industries than in the past.