Finally, America's Job Machine Is Getting Cranked Up
Less than two years ago, a traumatized American workforce had gotten used to the unnerving but constant drumbeat of America's largest companies announcing massive job cuts. Citigroup (C), 52,000; Bank of America (BAC), 35,000; AT&T (T), 12,000; Chrysler, 5,000. The list continued to a total of over 8.5 million jobs lost during the Great Recession.
Today, Americans may still be worried about jobs, but the trend is finally reversing as companies are starting to hire again, albeit in smaller numbers. Google (GOOG) added nearly 800 workers during the first quarter, the most hiring the company has done since 2008's first quarter. It has plans to bring on 2,000 new employees this year.
With Google being just one of several companies that have made hiring announcements recently, modest momentum seems to be building in the jobs market. Early signs are positive: the National Association for Business Economics (NABE) on Apr. 26 released a survey that shows fewer jobs are being shed and more are being created. In a survey of its members, 37% of respondents plan to increase employment in the next six months, up from 29% in January, and up from 16% a year ago.
Rising Salaries As Well
Says William Strauss, a senior economist at the Federal Reserve Bank of Chicago: "After more than two years of job losses, job creation increased in the first quarter of 2010, suggesting a better outlook for hiring over the next six months."
Not only are companies planning to hire more, but salaries are also increasing as the NABE survey respondents reporting higher pay more than doubled to 26%.
A wide range of companies, including services, retailers, technology and health care, say they're hiring. Data storage company EMC (EMC) added 800 new positions in the fourth quarter and will increase that to some 2,000 jobs in 2010. JPMorgan Chase (JPM) has said it's hiring 9,000 workers, while call-center company Stream Global Services is hiring 500 new workers.
These numbers bear out government data that show employers in March added 162,000 jobs, the most in three years. They also set the stage for what could be upbeat news on May 7, when the government will release its closely watched monthly jobs data.
"Targeted Policy Actions"
Christina Romer, the chief economist at the White House, is hopeful that President Obama's policies will lead to a much quicker recovery than expected in most quarters. "Targeted policy actions are what the economy needs to ensure a more rapid return to full employment," she said in a speech at Princeton University on Apr. 17.
While the current high rate of unemployment at 9.7% worries the Obama administration, Romer is positive that jobs will come back along with the economic recovery. She chided "observers" who talk about "unemployment remaining high for an extended period with resignation."
Much of that talk stems from worry -- not at all unfounded -- that the labor market has experienced a fundamental shift in a time of great high-tech innovation and globalization. It posits that many jobs have just disappeared, been automated or shipped overseas (especially in manufacturing).
No Rapid Turnaround
Dennis Hoffman, economics professor at Arizona's W.P. Carey School of Business, says corporations have learned to "keep the workforce lean and highly productive," and they don't have any incentive to hire everyone back.
Hoffman points to data that show how these factors could slow down a jobs recovery: In the eight recessions between 1947 and 1982, it took the job market 20 months on average to fall, hit bottom, then recover to pre-recession levels. In the recession of the early 1990s, jobs took 32 months to recover. That stretched out to 48 months in 2001.
"The 2001 recession wasn't even as deep, and it took far longer for jobs to come back. Today, much of the same dynamics are in place, except that things are far worse in that this is the deepest recession in the post-war period," says Hoffman. "All of those factors work against the standard notion of hiring workers back quickly."
"We're Growing Again"
Still, the hiring news that has emerged in recent weeks is welcome. Romer believes that jobs will come back along with a demand recovery as GDP grows. "The combined result of the policies that we've taken, the inherent resiliency of the American economy. . . is that we're growing again," she said.
The initial picture shows that as U.S. GDP logged its third quarter of growth, companies are just starting to hire and advertise for more jobs. Indeed.com, which collects job listings from thousands of sources, reported a 19% increase in postings in March vs. the same month last year. Yes, that's up from a horribly low year-ago number, but it is up. The jobs recovery clearly has a long way to go. Here's hoping it's finally getting started.
Editor's Note: This is the first installment of our six-part special report: Restarting America's Job Machine.