WASHINGTON – Jan. 11, 2012 – After nearly three years of unemployment, David Mote will be back at work next week, overseeing construction of a medical school building in Dothan, Ala.
Mote, whose $2,000 weekly salary was cut to $360 in unemployment benefits before he lost even that 10 months ago, can again contemplate going out for dinner and taking in a weekend football game. “It feels great,” says Mote, 52. “I’ve got a job. I got my (health) insurance back.”
His employer, Batson-Cook of Atlanta, called Mote back to work amid a surge in health care and apartment construction as young adults who had doubled up with relatives find jobs and move into their own homes.
After losing 2.2 million jobs in the economic downturn, the construction industry is projected to add 113,000 this year, more than doubling last year’s pace and placing it among the fastest-growing sectors, according to a 2012 job market forecast by Moody’s Analytics. Even a moderate rejuvenation of the troubled sector – thanks largely to a multifamily building boom – helps the economy because of its ripple effects across industries such as furniture, steel and concrete.
The job outlook has brightened the past two months as higher consumer spending, improved business confidence and a stock market rally have somewhat eased concerns about further shocks from Europe’s financial turmoil.
Economists recently surveyed by the Associated Press expect employers to add 2.1 million jobs in 2012, an average of 175,000 a month. That would top the monthly pace of 136,000 last year and 78,000 in 2010, though still fall short of the 250,000 to 300,000 needed to cut unemployment quickly.
The USA has recovered just 2.6 million of the 8.8 million jobs lost in the recession.
“It’s not going to be a breakout year,” says Mark Zandi, chief economist of Moody’s Analytics. Moody’s projects job gains of about 130,000 a month – about 1.6 million for the year – in line with 2011.
Moody’s also predicts:
Three categories – professional and business services, education and health care, and leisure and hospitality – will lead job gains, collectively producing more than 1 million. The booming energy sector will also continue to hire.
Sun Belt states hammered by the recession – Florida, Arizona, Georgia and Nevada – will rebound some as an easing of the foreclosure crisis lets homeowners move more easily. All four are projected to be among the 10 fastest-growing job markets.
Rust Belt manufacturing bastions such as Illinois, Ohio and Indiana will generate jobs more slowly as the European financial crisis hampers exports.
Driving the improvement in overall job growth is a pickup in hiring and confidence among small businesses as banks modestly ease credit standards. Small firms, particularly start-ups, typically account for two-thirds of the new jobs created in a recovery. Also, productivity gains that have allowed companies to do more with fewer workers are slowing, government reports show.
“Small businesses are being more aggressive” than large ones, says consultant Harry Griendling of DoubleStar.
A wild card: The retirement of Baby Boomers could help trim the jobless rate even without blockbuster job growth, says Dean Maki, chief U.S. economist for Barclays Capital.
The optimism is heavily tinged by caution. Many experts expect payroll growth to slow the first half of the year amid an expected drop in exports and a pullback in consumer spending. With real income growth running at a tepid 1 percent annual rate, Americans had to dip into savings to fuel their holiday buying binge – a trend that many analysts say can’t be sustained.
And many businesses are hesitant to ramp up hiring significantly amid lingering concerns about Europe’s debt crisis and a presidential election year that will leave battles over taxes and regulation unresolved.
A survey of 18,000 employers released last month by staffing giant Manpower underscores both buoyancy and prudence. Employers’ hiring outlook for the first quarter was at its highest since 2008. At the same time, the level of employers unsure of their hiring plans was the most since 2005.
Big companies cautious
Many large companies, in turn, are holding off on permanent hiring and relying heavily on contractors and temporary workers to complete projects, says Janette Marx, senior vice president of staffing company Adecco. The good news: That’s fattening payrolls for third-party providers, such as engineering and accounting firms.
While big corporations are hiring cautiously, they’re sitting on record cash reserves and driving job growth more than consumers, who make up 70 percent of the economy but remain burdened by debt. Companies, for instance, are boosting travel budgets and shifting their computer software systems to remote, cloud-based networks.
The expenditures are forcing professional and business services to beef up staffing. Cleveland-based accounting firm Cohen & Co. is enlarging its 250-employee staff by about 10 percent this year as highly profitable corporations seek to reduce taxes, weigh mergers and navigate increasingly complex banking rules stemming from financial reform, says CEO Randall Myeroff.
Engineering firm Black & Veatch, of Kansas City, with about 6,000 U.S. employees, plans to add several hundred this year as utilities retrofit power plants to meet stricter pollution limits and smartphone carriers expand networks, says CEO Len Rodman. Yet that’s far less than the 1,000 U.S. employees the firm added last year. Rodman worries that electricity providers could rein in spending if the European crisis hurts their customers’ exports. “We have taken a conservative approach,” he says.
Health care providers are scrambling to meet the needs of an aging population. Philadelphia-based Genesis HealthCare, whose 40,000 employees provide rehab services in nursing homes in the Eastern U.S., is expanding to Arizona, New Mexico and Oklahoma, hiring 10,000 workers. “The Baby Boomers are getting older,” says Vice President Mike Guglielmo.
Hotels, meanwhile, are looking for bellhops, front desk clerks and maids as companies replenish travel budgets slashed in the recession and tourism picks up moderately. That’s a boon for Texas, where a population boom and business growth feed off each other. Joseph DePalma, president of DePalma Hotel, says occupancy at his eight franchise hotels in Texas has risen to about 65 percent from 55 percent the past year. “Companies are back to traveling again,” he says. DePalma plans to increase his Texas staff of 1,200 by more than 100 this year.
Texas is again projected to top the nation in total job gains, with more than 200,000.
Meanwhile, North Dakota, home to one of the nation’s biggest untapped oil reserves, is expected to lead in the pace of job growth, at 2.8 percent. Continental Resources is adding 50 to 75 workers to its existing base of about 160 in the Bakken oil field as it drills about 240 new wells, says Chief Financial Officer John Hart. Much of the activity has been fueled by benchmark crude oil prices that have hovered around $100 a barrel. “I have a better return that enables me to take a risk,” Hart says.
The frenzy has turned North Dakota, with a population of 684,000, into a job hunter’s magnet that added 17,000 workers last year, a 4.5 percent gain. Continental’s recent advertisement for a computer specialist drew 518 applicants from as far away as South Africa.
Uneven job growth
Not every sector is expected to grow robustly. Retailers likely will pull back hiring as consumer spending moderates, according to the Moody’s study. State and local governments will continue to shed jobs amid budget constraints, though likely at a slower pace than last year. And factory payrolls could flatten or even contract slightly amid a slowdown in exports.
Some manufacturers plan to add workers because they can’t wring more output from existing ones. Paulson Manufacturing in Temecula, Calif., laid off more than half its 220 employees in the recession, though revenue fell just 25 percent. The company, which makes face shields for industrial and public safety use, installed automated technology to boost efficiency and got more out of each worker, helping it increase profits, says CEO Roy Paulson.
But with sales expected to rise about 15 percent this year, Paulson plans to hire 12 to 15 employees.
“We might have worn out some of these people a little bit,” he says. If he forced his workers to shoulder a still bigger burden, “Worker compensation costs go up and your sick rate goes up.”
Even more encouraging: Small businesses – which create an outsize share of jobs – appear to be launching and expanding again. The number of establishments opening hit a record low of 1.1 million in 2011’s first quarter, the most recent data available, according to the Labor Department. But anecdotal evidence suggests the pace of business start-ups has increased lately, says Dane Stangler, research director for the Kauffman Foundation, which studies entrepreneurship. The International Franchise Association expects the number of U.S. franchise locations to rise 2 percent this year after dipping three years in a row.
Franchise company Driven Brands, which owns Meineke and Maaco, sold more franchise licenses in November than in the past five years combined, says CEO Ken Walker. “We are beginning to get businesses financed,” he says.
Franchisee Stephen Keel, who owns a Maaco auto body outlet in Catonsville, Md., sought for a year to move it to nearby Randallstown and add a Meineke auto repair shop at the new site. But he couldn’t get a $1.7 million loan from seven banks despite a $2.2 million appraisal of his planned new land and building.
Recently, he snared a loan from Susquehanna Bank and plans to add four to seven workers to his 12-employee staff after he opens the new location in April.
“I was tickled to death,” Keel says. “It was a very long, dreadful, painful process.”
SOURCE: USA TODAY
