increases in productivity can help boost living standards because companies can increase wages financed by rising output.
If companies are increasing the nominal wage rates (i.e., wage rates in terms of money) from rising output then there's no net gain in productivity. In fact, rising nominal wages are the result of "too many dollars chasing too few employees", i.e., it's nothing but a sign of inflation. In the absence of inflation, the real gain from increased productivity is this: more stuff. More stuff = larger aggregate supply of goods; larger aggregate supply of goods = lower aggregate price level; lower aggregate price level = increase in one's wages in REAL (i.e., purchasing power) terms.
But during the recession, companies have been using their productivity gains to bolster their bottom lines as many struggle to stay in business.
Companies always "use their bottom lines" to stay in business, recession or no recession. That was a "filler" sentence, meant to sound ominously profound but which actually says nothing.
This cost-cutting helped many companies report better-than-expected second-quarter earnings despite falling sales.
Even in a healthy, non-inflationary economy, cutthroat competition among producers of widget X could (and often does) lead to falling sales for a particular firm. As long as the firm "uses its bottom line" to keep costs well below revenues it can have healthy earnings. Nothing new in that sentence either.
But economists worry that such aggressive cuts will make it harder to mount a sustainable recovery.
Only some economists worry that when businesses pursue their self-interest and readjust their configurations of factors of production -- land, labor, and capital -- will it be harder to "mount a sustainable recovery." Those economists would be the Keynesians, who wrongly believe that spending is the ultimate source of wages, and not saving, i.e., capital accumulation (which inflation erodes). To Causal-Realist economists -- sometimes known as the Austrian school of economics -- the "aggressive cuts" are part of the "sustainable recovery"; in fact, there can be no LONG RUN, sustainable recovery without them.
Consumer spending is critical to the recovery since it accounts for about 70 percent of total economic activity.
Spending is already occurring in the economy but it's being done in the area of higher-order goods, rather than immediate consumer goods. Unless the article is accusing people of putting their money under their mattresses, spending -- either consumption spending or capital-goods spending -- always occurs. The problem with this article -- and the problem with those economists and conservatives who agree with it -- is that it assumes that an inflationary bubble economy is the norm and that everything should be measured against the "boom." Keynesians are congenitally incapable of accepting that the "bust" phase of the business cycle is the inevitable and necessary readjustment from a period in which inflation caused malinvestment (which includes hiring people for new businesses, or expansions of existing businesses, that would not have taken place in a healthy, non-inflationary economy).
Businesses producing more with fewer employees means that unemployed Americans continue to face a dismal job market.
According to this logic, a non-dismal job market would be for the U.S. economy to adopt the methods of a poor, socialist African village: abolish all labor-saving machinery and capital that increases worker productivity and hire everyone in the village to dig ditches with teaspoons -- low productivity and full employment!
While many of the nation's big retailers have said back-to-school sales have been dismal, the government's Cash for Clunkers program did boost auto sales in August.
Econ 101: Part of the reason that back-to-school sales have been dismal is precisely because of a government subsidized "Cash for Clunkers" program. "Cash for Clunkers" may have boosted auto sales but only at the expense of shrinking the sales for goods X, Y, and Z -- those goods that people would have purchased had the money for them not been siphoned off by government to subsidize "Cash for Clunkers." Government merely redistributed sales that would have occurred elsewhere in the economy to sales for new, "efficient" automobiles. In short, it shifted sales away from items that consumers actually wanted to items that they normally would not have wanted. Additionally, "Cash for Clunkers" destroyed cars that were already bought and paid for -- debt-free cars -- and encouraged people to get back into debt (or get further into debt). It also diminished the supply of older, used cars, that would have sold on the used car market for less money than new cars -- the used car market being the main supply of cars for those with low incomes. According to this logic, why stop at cars? Why not "Cash for Old Toaster Ovens"? or "Cash for Incandescent Light Bulbs"? Or "Cash for Old Clothes"? The mind boggles at the stupidity of it all.
You make a good point here. I've been thinking for a while that the small businesses that have gone under were probably poorly managed, and wouldn't have existed without something like an inflationary economy. A LOT of small businesses sell stuff that I can't imagine ANYONE wanting even in a fabulously wealthy country, much less in hard economic times (take a walk through your local mall, and take a look at the kiosks for a sampling of what I'm talking about).