Jobs, career information, and employment services for job candidates, employees, employers and recruiters.
Employers won't start hiring until demand outpaces current staffing By Caroline Baum Bloomberg News
August 03, 2003
There is no sign that the improvement in economic activity over the last few months has infiltrated the labor market just yet.
In fact, all indications from Friday's employment report for July suggest just the opposite. Until there's evidence companies have to work their current staff longer hours to meet demand for their goods and services, net new hiring is probably months off.
Employment declined for the sixth consecutive month in July, and the workweek, a leading indicator, fell to an all-time low of 33.6 hours. The manufacturing sector lost jobs (71,000) and hours (0.2), with the factory workweek slipping back to its low for the cycle of 40.1 hours.
The number of manufacturing employees times the number of hours they worked, a proxy for output (excluding productivity growth) produced a 1.1 percent decline in manufacturing man hours. With the exception of April's 1.5 percent plunge, July's decline was the biggest since October 2001, in the wake of the terrorist attacks.
Less than a third of manufacturing industries added to payrolls last month, which is only remarkable when compared with June's meager 23.8 percent.
"While labor markets typically lag economic improvement, especially in an environment of considerable business caution, this report is still notable for its consistent weakness," said Peter Kretzmer, senior U.S. economist at Bank of America Securities.
There was also no confirmation that the strength in business spending on information technology is translating into new jobs, with "employment in that sector continuing to decline," Kretzmer said.
The message of a broad-based decline in manufacturing last month was partly offset by expanding manufacturing activity for the first time since February, according to the monthly business barometer from the Institute for Supply Management. The ISM Index rose 2 points to 51.8 as 12 of the 20 industries reported growth.
"While many respondents mention that they fail to see the recovery in their businesses, others indicate a higher level of activity than they have seen in some time," said Norbert Ore, chair of the ISM Business Survey Committee, in releasing the report.
"The manufacturing sector is trending positively," he said.
The trend will have to grow more positive and become more poised if employers are to start hiring again. The good news-bad news story is that rapid productivity growth is diminishing the demand for labor.
Even using year-over-year productivity growth (to smooth quarterly wiggles) of 2.4 percent for the four quarters ended in the first quarter, the economy would have to register sustained growth in excess of 3.5 percent to push the unemployment rate down.
Last week, the Commerce Department reported the economy expanded at an annualized 2.4 percent rate in the second quarter, well above the consensus forecast but not fast enough to redeploy, or re-employ, the army of unemployed.
The hope is that with inventories low relative to sales, businesses are going to step up production in the second half. Auto manufacturers third-quarter production plans will add a little less than 1 percentage point to growth, Sharp says.
Email This Page!