The Gap...between Economists and Realities

The markets, and the economists, are betting that the employment situation will be much brighter next year, and corporate profits would be soaring. This is because the lean and mean firms will see revenue flowing straight to the bottom line. Some flaws in this argument should be anticipated-

If the firms try to do more with less and manage to produce more revenue with less growth in expenses, how will the employment situation become much better? If employment and consumer spending does not improve, how will capital spending hold up?

The news on the margin continues to be negative- MSFT announced layoffs of 800 more, in addition to the 5000 earlier this year. J&J is cutting 7000 jobs. American, United, and Delta are cutting capacity faster than the decline in passenger traffic. Unless another bubble is inflated, it is hard to envision a rapid growth in employment.