Posted on: Monday, May 31, 2004
No end in sight to hiring trend
By William Sluis
Chicago Tribune
After a virtual economy-wide jobs freeze that lasted for about three years, hiring is picking up.
In the first three months of 2004, nearly 600,000 positions were added to the nation's payrolls.
The trend continued in April, as the economy added another 288,000 positions, on top of 337,000 a month earlier. The question now is whether still more openings can be found to satisfy several million job seekers.
Expect Friday's employment report for May to show the economy added 200,000 more jobs. That's the prediction of economist Sung Won Sohn, who says "businesses are playing catch-up. They may not want to do much hiring, but it has become a necessity."
Manufacturers, in particular, have been adding workers, said Sohn, of Wells Fargo & Co. in Minneapolis.
"Production is picking up and companies are boosting inventories, so factories are finding it is time to hire," he said.
Elsewhere, demand for workers is strong in healthcare and tourism, he said. Costs for lodging are going up, "albeit from very depressed levels," Sohn said.
While the economy may hit a few speed bumps later in the year, he said, "demand for workers has become quite robust and it appears it will remain healthy."
With exactly a month remaining before policy-makers of the Federal Reserve make a decision on interest rates, the central bankers are keeping an eye on all data that suggests the economy might overheat.
In their sights tomorrow will be the May report from the Institute for Supply Management, which measures activity in the manufacturing sector.
Eyebrows were raised Friday when the equivalent report from Chicago purchasing managers blew away forecasts, rising to a reading of 68 from 63.9 in April. The prices-paid index of the report showed companies paying more for materials than at any time since February 1995.
On that news, Wall Street analysts raised their ISM forecast to about 64 from 62.4 in April.
The big question hanging over Detroit is whether record high fuel prices, approaching $2.50 a gallon, will steer sales of gas-guzzling vehicles into a deep rut.
Analysts expect Wednesday's report of May car and light-truck sales to show a gain of anywhere from 1 percent to 5 percent over year-earlier results, even though gas prices have risen about 50 cents a gallon in the past 12 months.
For the automakers, the news isn't entirely good. Because of buyer balkiness over fuel costs, as well as generally blah sales during the year's first four months, dealers are offering heavy discounts and ultralow rate loans. That eats into the industry's bottom line.
The stock market, along with government offices and markets for bonds, futures, options and commodities, will be closed today for Memorial Day. The weekly auction of short-term Treasury debt will take place tomorrow.
Meanwhile, the stock market will resume trading tomorrow amid musings about the prospects for a summer rally. So far this year, Wall Street has experienced small losses for both stocks and bonds.
However, economist Gail Fosler sees a likelihood that investors will be well rewarded if they stay the course, because the outlook for earnings continues to brighten.
"Profits are rising at a 30 percent annual rate, both because of huge gains in domestic corporate profitability and because strong economic growth and a low dollar are boosting business receipts from the rest of the world," said Fosler, of the Conference Board in New York.
An important shift is under way, however, she says, with nonfinancial businesses showing the heftiest earnings growth, a reversal of the trend in recent years.
Fosler says financial services firms such as banks and brokerages are being squeezed by "very low interest rates, weak loan demand and a declining demand for many higher-margin investment banking and risk-management products."
