News Column

Manufacturing a Star of an Upbeat Jobs Report

Feb. 6, 2012

Paul Davidson and Tim Mullaney

Factories

Last week's surprisingly strong jobs report spotlighted healthy employment gains in manufacturing -- an industry that was expected to be hampered by Europe's economic downturn this year.

So far, the nation's factories are defying the gloomy forecasts, adding 50,000 jobs in January -- their strongest showing in a year -- on top of 32,000 in December, the Labor Department said Friday. Overall, employers added 243,000 jobs in January, the most in nine months.

Manufacturing was the second-biggest gainer, behind professional and business services.

Economists don't expect such robust advances to be sustained the entire year, but there are other signs that manufacturing activity could pick up more than many expected.

For example, the Institute for Supply Management said last week that growth in new factory orders rose to a nine-month high in January.

"There's reason to be optimistic," says Mark Zandi, chief economist at Moody's Analytics. Zandi had predicted manufacturing employment would be flat this year, but now estimates payrolls will rise by about 250,000 -- the industry's third-straight annual increase after years of steady declines.

A solid performance by manufacturers would be welcome news for the economy and job market, since the sector has powerful ripple effects across a range of suppliers and service firms.

Economists attribute the job gains to surging auto sales, falling productivity -- or output per worker -- and slight easing of worries about Europe.

Of the 50,000 increase in factory employment, 44,000 came from makers of durable goods, such as vehicles, metals and other parts used in automobiles. Vehicle sales in January rose to a seasonally adjusted annual rate of 14.2 million, the briskest pace in several years. Since late 2011, the industry has been making up for sales lost last summer when Japan's earthquake and tsunami disrupted supplies.

Also, since the recession began, manufacturers have boosted productivity by replacing workers with technology and squeezing more from remaining employees. But factory productivity fell in the fourth quarter and rose just 2.8 percent last year, down from 6 percent in 2010.

"There's only so much you can get out of your workers," says Chad Moutray, chief economist of the National Association of Manufacturers.

Europe remains a threat to the recovery. Although U.S. exports to Europe have fallen as a result of the financial crisis there, only about 20 percent of overseas shipments go to the continent. And European leaders recently have indicated they're prepared to do what's necessary to avoid a financial meltdown that upends the global economy, bolstering manufacturers' confidence.

"Those concerns have ebbed a little bit," Moutray says.

Among those hiring:

Industrial parts maker Atlas Machine & Supply of Louisville plans to add 15 to its staff of 200 this year, about the same as last year, even though sales growth is expected to slow to about 4 percent from 25 percent in 2011. "We're working so much overtime -- 20 to 30 hours a week -- we can't keep our people" at that level, says President Rich Gimmel.

Intel is looking for 900 U.S. workers to go with the 47,000 it has now, and expects to hire more later in the year as it completes a multibillion-dollar expansion of manufacturing campuses in Arizona and Oregon.

"The upturn is very real," says Cindi Harper, Greater Americas staffing chief.

Tesla Motors, which is gearing up to introduce its first electric sedan this year, plans to add 1,000 manufacturing workers by December.

Tempering factory job growth is a sluggish construction market that's shown small signs of life recently.

If that takes off, "then you're going to see some very dramatic increases in manufacturing," Gimmel says.



Source: Copyright USA TODAY 2012


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