U.S. employment headed for "breakout year" as companies add to payrolls

With U.S. and European economic fears at bay, the labor-market rebound could add the most jobs in 15 years.

Jul 2, 2014 @ 10:51 am EST

A family-run concrete business in Michigan, the U.S.'s second-biggest carmaker, the largest railroad and a solar power provider in California are all hiring as industrial companies lead a broad labor-market rebound that's on pace to add the most jobs in 15 years.

Employment may be headed for a “breakout year” as companies feel more secure adding to payrolls following several years of demand rising only to stumble on threats from U.S. budget standoffs, a debt-ceiling induced default and a European credit crisis, said Marisa Di Natale, a director at Moody's Analytics.

“It's the first year in several where we haven't had some kind of manufactured fiscal showdown in Washington, which weighs on business confidence and consumer confidence,” Di Natale said.

Industries from construction to autos to oil and gas are increasing jobs as growth accelerates after a harsh winter stunted business. As some sectors, such as floor retail sales, have yet to rebound and wages have been kept in check, the recovery is likely to be a steady climb rather than a boom, according to Jeffrey Joerres, executive chairman of staffing company Manpowergroup Inc.

Nonfarm payrolls may rise by 215,000 in June, which would mark a fifth straight month of increases topping 200,000, according to the median of 89 economists' estimates ahead of the Labor Department's monthly employment report July 3. That also would be the longest streak of monthly gains since September 1999-January 2000.


Help-wanted signs at concrete company Kent Cos. is one indication of a hiring rebound that could create more than 2.56 million jobs, the most since 1999, if the pace is sustained. Warren Buffett's BNSF Railway Co. plans to grow by 2,100 positions in 2014. SolarCity Corp.is adding 400 people a month at the rooftop power-system installer backed by Elon Musk. At Ford Motor Co., hiring is so strong that the automaker predicts it may beat a 2011 plan to bring on 12,000 new workers by 2015.

“We do see and feel and hear from our clients that there is a building of demand,” Mr. Joerres said. Many employers that once held off on hiring now can't wait any longer because “they have stretched everyone for the most part to the maximum.”

Jeff VanderLaan, chief executive officer at Kent Cos., plans to add 100 people this year, a 27% jump in his workforce to a record 475. The provider of services such as pouring floors and installing piers is seeing business boom in Texas, North Carolina and Ohio.


“If you have a desire and can write your name and will go out and work hard, you can get a job here today,” said Mr. VanderLaan, who expects $110 million in revenue this year, more than double 2010's figure.

Employment at companies rose by 281,000 in June, the most since November 2012, according to data by ADP Research Institute. The median estimate of economists had called for a 205,000 increase.

The U.S. economy is forecast to accelerate after year-on-year growth slowed to 1.5% in the first quarter when severe snowstorms battered the U.S. and kept customers away from stores, shut factories and gummed up transportation of goods.

With consumer spending still tepid, companies aren't hiring in anticipation demand will rise, as in other recoveries, Mr. Joerres said. Instead they are they are expanding when they have orders in hand, he said.

“We're not seeing wage inflation at the rate you would think and we're not seeing increased hours worked at the rate you would think,” said Mr. Joerres, whose firm has more than 400,000 clients worldwide.


Still, the signs are positive, he said. Temporary help and employment services both saw jobs jump more than 8% in May from a year earlier. May employment growth was also driven by the oil and gas extraction industry at 7.6% and building construction at 5.2%. Outpatient care jumped 5.8% and motor vehicles and auto parts climbed 4.3%.

The continued recovery in homebuilding is crucial for the job market, Ms. Di Natale said. Beyond the direct construction jobs, new homebuilding spurs purchases of carpets, flooring, lighting, appliances and furniture. Moody's is forecasting job growth of 1.8% this year, which would be the highest rate since 2005, and for it to peak at 2.4% in 2016.

Housing starts on an annual basis surpassed 1 million in May and April. They had declined to as low as 478,000 in April 2009, creating pent-up need for homes and apartments.

“We're expecting housing demand to pick up a lot over the next few years and that's actually what underpins the strength of our forecast,” Di Natale said.


Marty Mitchell, chief executive of Mitchell & Best Homes, has contracted six employees since the fall, the first time he's had to expand his workforce since 2006. His isn't the only homebuilder hiring. D.R. Horton Inc., the U.S.'s largest new-home builder, brought on 700 new employees over a 12-month period ending in January, the company said at the time.

Mitchell had 82 workers at the peak of the building boom in 2006 and slashed that figure to 17 before the recent hiring. Mitchell & Best is ramping up to deliver 50 to 60 homes next year, about double from 30 this year as the housing recovery “is plodding along,” Mr. Mitchell said.

“It's exciting to hire people again as opposed to hunkering down,” he said.

SolarCity is hiring 400 workers a month with the majority of positions in installation, sales and call centers as demand for roof-top solar power revs up, said Hayes Barnard, chief revenue officer.


“There's increased demand from residential homeowners who are interested in solar power and we have reached a tipping point,” Mr. Barnard said. “These are jobs being added across the country.”

Positions for software developers, computer systems analysts and financial compliance officers are getting hard to fill, said Paul McDonald, senior executive director of Robert Half International, a professional employment service company.

The boom in technology has driven the unemployment rate below 1% in the industry. New financial regulations and requirements for the Affordable Care Act are also boosting demand for professionals, he said.

“I'm not seeing weakness. There's strong demand in our professional sectors,” McDonald said. “After going through some dark times in the past five to seven years, it's nice to see that the sun is coming out just a bit.”

(Bloomberg News)

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