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2007-01-12
U.S. Job Growth Reflects Hiring Practices
The Los Angeles Times reports the U.S. economy added a net 128,000 jobs in August, far below the average gains in the 1990s and much of last year. But such lackluster job growth could have a silver lining.
Although employers are not hiring as aggressively, they may not fire as aggressively either. That could lower the odds of a severe economic slowdown or recession, experts say.
Today's slower but more stable hiring growth "reduces both inflation and business cycle risks," said John Lonski, an economist with Moody's Investors Service. Unlike the late 1990s boom, "businesses are generally avoiding the types of speculative excesses whose correction often ultimately sparks a recession," he said.
Give the credit to "just-in-time hiring."
Improvements in technology and worker productivity, along with more adept use of temporary workers and outsourcing, have made businesses more efficient at managing their staff levels, economists say.
"We see firms handling their workforce much more like inventories," hiring temporary staff during boom times and cutting them back as business slows, said Jared Bernstein, an economist with the liberal Economic Policy Institute in Washington. As a result, he said, the business cycle has moderated. "We see much less of the traditional boom and bust," Bernstein said.
The relatively low unemployment rate suggests that employers are managing their staffing tightly. The jobless rate in August fell to 4.7 percent, the Labor Department reported Friday, down from 4.8 percent in July and near a five-year low.
The 128,000 jobs added in August were in line with economists' expectations and up from a revised 121,000 gain in July. Schools, hospitals, financial firms, computer-design shops and construction companies were among sectors recording job gains, while manufacturing, retailing and trucking were among those posting losses.
However, while hiring is below par, so are layoffs. They fell to a six-year low of 37,178 in July, according to the Chicago-based job placement firm Challenger, Gray & Christmas. Although layoffs usually pick up during the last four months of the year, Challenger expects this year's total to still fall below last year's.
"Because there's been less over-hiring this time ... that will act to keep layoffs down compared to previous periods," the firm's president, John Challenger, said.
The increased use of temporary staffing in various industries may also prevent future layoffs. Companies spent $97 billion on temporary staff this year, 8.2 percent more than last year, and they are expected to spend 7 percent more next year, said Barry Asin, executive vice president and chief analyst at Los Altos-based Staffing Industry Analysts. Temporary staff make up 9 percent of the workforce at companies with more than 1,000 employees, about 2 percent of the total workforce, Asin said.
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