Cutting payroll is a perilous guessing game in a declining economy. Employers who cut too little may suffer a dangerous depletion of cash reserves. Those who cut too much take the risk of ceding revenue to rivals.
But as the economy stabilizes, gains in worker productivity will help to slow and ultimately stop the rise in unemployment. Revenue per employee, a measure of worker productivity, will rise as more companies correctly adjust their payrolls to match their prospects.
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