The stock market bubble distorted other areas of the
U.S. economy as well. Firms hired large numbers of
permanent employees to satisfy an episode of demand
growth that was not sustainable.When the bubble
burst, demand growth slowed and firms had to lay off
employees. Now, two years after the recession’s official
end-date in November 2001, labor market weakness
persists.The rapid appreciation of stocks held in employee
pension plans led many firms to reduce cash
contributions to their plans, which made reported
earnings look better.When stock prices dropped, the
value of plan assets shrank, contributing to an underfunding
problem in excess of $200 billion among S&P