Strong hiring hints at stable US growth
More new jobs – 180,000 last month – suggest that problems in the housing sector have not spread.
Hiring this spring: retailers, restaurants, hospitals, law firms, and accountants. Schools are searching for teachers. Even construction companies specializing in commercial projects are putting more hard hats on the payroll.
The demand for workers is robust enough to lure out-of-work Americans back into the hunt for jobs, pumping up the workforce to its highest level in seven years. The unemployment rate in March, released Friday, is now at 4.4 percent, its lowest point in five months and a state reminiscent of the late 1990s, when the job market was at its tightest.
The strong labor numbers show that problems in the housing market, especially in loans to people with less-than-ideal credit, have not halted growth in other areas. If the housing slump remains contained in coming months, the Federal Reserve will have some flexibility to keep interest rates stable – benefiting some investors, policymakers, and households. The robust demand for workers, too, may help absorb some of those laid off in sectors such as housing and autos where economic prospects are less bright.
"As long as we are creating jobs, it means more income for consumers, and that will power growth," says Mark Zandi, chief economist at Moody's Economy.com in West Chester, Pa. "A resilient job market means the five-year-old expansion will remain firmly intact for the foreseeable future."
Last month, the US economy added 180,000 jobs, more than economists had anticipated. For the first three months of the year, the economy created 455,000 jobs. This level of hiring suggests that the economy grew at about a 2.5 percent rate in the first quarter, analysts say. Some had been predicting an economic growth rate of less than 2 percent, particularly after a frigid February hurt construction and consumer spending.
"It defies gloomsters' predictions that the economy is heading into a recession," says Stuart Hoffman, chief economist at PNC Financial Services Group in Pittsburgh. "Those people have to go back to the drawing board."
Growth will help the economy work its way through some of the soft spots. For example, problems in the subprime mortgage market are likely to reduce consumer spending this spring and summer, says Mr. Hoffman. But that will be somewhat offset by higher wages: The March numbers showed that wages are up 4 percent from a year ago. "Income earned is probably the best single source for consumer spending support," he says.
However, the new jobs being created will not be able to replace the good jobs lost in the auto sector and the housing market, some economists point out. Last month, for example, the manufacturing sector lost another 16,000 jobs.
"We know from job displacements that displaced manufacturing workers take a 15 to 20 percent wage hit," says Jared Bernstein, senior economist at the Economic Policy Institute, a think tank in Washington. "They also don't end up with a decent health or pension plan."
While autoworkers are struggling, particularly in the Midwest, construction workers are doing better, especially those involved in commercial construction. Last month, almost one-third of all the new jobs were in construction. Over the past year, the number of jobs in nonresidential building, specialty trade contractors, and civil engineering has grown 3.4 percent, according to the Associated General Contractors of America. The total number of jobs gained now exceeds those lost in residential construction.
"It's booming," says Kenneth Simonson, chief economist for the AGC in Washington. "There are lots of new projects."
Mr. Simonson expects the good times to continue for a while, because US voters last fall approved a record dollar amount of bond issues for things such as new schools, roads, and public works.
"It takes awhile to choose a site, acquire it, get an architectural design, and then let bids," he says. "So I think this boom will continue for several more months."
In fact, some jobs specialists worry about the job market tightening too much. John Challenger, president of Challenger, Gray & Christmas in Chicago, says that the lack of quality workers could result in a "rapid" economic slowdown, as companies move their operations offshore to find workers.
It's already hard to find workers in IT and accounting, says Roy Krause, president of Spherion Corp., a staffing company based in Fort Lauderdale, Fla.
"We have 600 offices around the country, and I can almost guarantee we have more jobs than candidates," he says. "We're telling our clients that when you find a qualified person, make a decision quickly."