Ricardo Caballero, a professor at MIT (...) found that the links between hiring and economic growth are slower in countries with high legal protection against dismissal, especially where such protection was enforced.

Or maybe the companies were more likely to hold on to employees during  a downturn and had less need to hire new ones when the economy picked up.

In a "more flexible" economy they could have dumped them as soon as they liked, had them starve or freeload off the state and then re-hire them  when they needed them. Good for profits, bad for the community.