Jobs abound, despite housing woes
In October, 166,000 new jobs were created, about twice as many as expected, the government reports.
For almost two decades, Chicagoans have feasted on the sandwiches made with fresh bread at Pockets. Last month, Pockets expanded to the western suburbs, opening a franchise in a strip mall in Naperville. To fill its right-out-of-the-oven pocket bread, it hired seven employees.
"We were looking for people who had some food-service background and could work in a fast-paced environment," says Bob Lisberg, owner of the franchise.
Hiring by places like Pockets is one of the positive crosscurrents in the economy that is confounding analysts by sending out both signs that it still has some zing and signs that it's slowing.
In a surprise to most economists, the economy created 166,000 new jobs in October, about double the expectations, the Labor Department reported Friday. The unemployment rate remained steady at 4.7 percent despite the continued trouble in the housing market. "Clearly, the economy is not nearly in as bad shape as many of us feared," says Joel Naroff of Naroff Economic Advisors in Holland, Pa. "But I think we still have to be cautious."
There is plenty of room for caution as well as optimism. Personal income rose a meager 0.1 percent in September, after a strong 0.4 percent advance in August.
Retail sales have been weak so far this fall, but cooler weather may soon put buyers back in the mood to shop. Trucking companies are complaining they don't have enough business, but an export boom, aided by the weak US dollar, is creating a shortage of ships to move goods to foreign markets.
"We have crosscurrents. It's never all green, never all red, but the economy is more greenish-yellow than reddish-yellow," says Stuart Hoffman, chief economist at PNC Financial Services Group in Pittsburgh.
Bob MacIntosh, chief economist at Eaton Vance in Boston, says a better measure of the labor market could be the household survey, which queries people in their homes, instead of the establishment survey, which asks businesses about their hiring. The October household survey found a 250,000 decrease in jobs. But spread out since the beginning of the year, he says, it shows an average gain of 8,000 jobs per month.
"The economy is not that weak," he says. But he adds that the current establishment numbers "overexaggerate the health of the economy."
In October, the bulk of the new job growth came from the service sector, such as professions, restaurants, hotels, healthcare providers, and teaching. Manufacturing and construction jobs declined.
"The distinction between goods and services is more and more stark," says Dan Meckstroth, chief economist at Manufacturers Alliance/MAPI in Arlington, Va. "Goods are declining, and a few service sectors are making up the difference."
The restaurant industry is one sector that has been on the rise all year. One in 4 private-sector jobs – some 365,000 new jobs so far this year – have been created, according to Hudson Riehle, senior vice president of research at the National Restaurant Association. "The dynamics of it is that people are putting more disposable income into eating out," he says. "Out of Americans' spending on food, 48 percent goes to the restaurant community."
The increased spending is partially the result of more two-earner incomes, suggests Mr. Meckstroth. "They just don't cook at home as much as they used to, and they are willing to spend money in dinner out."
However, some of the strength in the hospitality industry is related to the weakness of the US dollar. "To the Canadians and Europeans, the US is a bargain," he says. For example, this week, he says, New York is flooded with foreign tourists for the New York Marathon.
The flood of foreigners hit home recently when economist Lincoln Anderson of LPL Advisors in Boston tried to find a hotel room in Manhattan.
"Everything was filled up," he recounts. But he also thinks part of the trend is because Americans' net worth continues to rise despite recent declines in home values. "The net worth of American households is up 7.8 percent of the last four quarters, and since the end of 2002, their net worth is up 42 percent, so I think US consumers are doing pretty well."
The restaurant industry is also filled with entrepreneurs who don't look at economic statistics or the value of the dollar when making decisions about whether the time is right to open their doors.
One of those is Lee Waddell, co-owner of the JavaMan Coffee shop, which opened last month in Albany, N.Y. The shop sells coffee and sandwiches mostly to state employees.
Mr. Waddell and a partner had heard that the coffee shop in that location was for sale. "My partner was a regular customer of the old shop and saw room for improvement," he says. "The economy was not really a factor."
The Albany economy, however, is helping them as well. A new government building is going up within two blocks, and private developers are erecting some new condos. JavaMan has hired two full-time employees and is looking for two more part-time workers.
Finding workers isn't that easy, says David Litchman, CEO of Pockets. "To tell you the truth, it's the most challenging part of opening a restaurant because these aren't the highest-paying jobs," he says. "But if we get the right opportunity in the Chicago marketplace, we will continue to try to expand."