Are staff cuts always the answer?

When the economy goes south or when the company is in trouble or wants to restructure or reduce expense, the first thing they do is to lay off people. Since this is the biggest expense of any business, it is natural to get the knife out at that first. But is it right to cut staff when you don’t need them any longer, and how do you know when you don’t need them any longer. The latest argument against staff cutting came from two mega stores who have fired enough people that they are now suffering due to a lack of it. Why is that? as I explained it before, that is the first thing that the companies look for in cutting expenses but they are not smart enough to figure out that it reduces the moral of the rest of the employees and then the companies say that their employees are not loyal. But first of all why do you have to hire so many people that you then have to discard them (that is right not lay off or firing but the actual word is discarding) when you don’t need them. How do you know that in the future you would not need those employees on whom you have spent millions, just to let them go and then apart from bad publicity and resentment, they may work for your rivals and then have the knowhow of your internal organization that they can use against you?