U.S. Hiring Grows As Companies Hit Limits With Workers

US companies more hiring By Martin Crutsinger

WASHINGTON -- U.S. companies will have to keep hiring steadily to meet their customers' rising demand.

That's the message that emerged from a report Wednesday that employers are finding it harder to squeeze more output from their existing staff. It also helps explain why ADP, a payroll provider, estimated Wednesday that companies added 216,000 workers last month.

Those findings reinforced confidence that 2012 will mark a turning point for the long-suffering job market and the economy. Applications for unemployment benefits have tumbled. Consumer confidence is at its highest point in a year. And the stock market has been on a tear since the year began.

Feeding on themselves, those trends tend to fuel further economic growth.

The brighter signs come two days before the government will issue the February employment report. It's expected to show a third straight month of strong hiring.

Business executives are sensing the shift. A survey released Wednesday by Duke University's Fuqua School of Business found that confidence among U.S. chief financial officers has risen to its highest point in a year. As a result, the survey found that companies expect to increase hiring for full-time jobs by 2.1 percent over the next year, up from 1.5 percent in a survey in December.

"This rebound is encouraging because increases in chief financial officer optimism have historically preceded improvements in the overall economy," said John Graham, a finance professor who directed the survey.

The survey was released the same day that the government reported a paltry gain in worker productivity at the end of last year. The 0.9 percent annualized increase was half the growth rate from the July-September quarter. Similarly, for the year, U.S. worker productivity grew at its slowest pace in nearly a quarter of century.

Productivity measures output per hour of work. Slower productivity can squeeze corporate profits. But it can lead to more jobs if it shows that companies can't derive more production from their workers. That often means they must hire to meet customer demand.

After the recession, productivity soared. After laying off staffers, companies managed to make their leaner staffs more efficient. Such productivity growth tends to slow eventually.

"The typical bounce in productivity that we usually see coming out of a recession has run its course," said Troy Davig, an economist at Barclays Capital. "Firms will likely need to rely increasingly on adding to payrolls to increase their output, rather than squeeze existing resources."

Overworking employees can also dull creativity and lead to less innovation, said Mike FitzGibbon, co-founder of 3Cinteractive, which builds applications for smartphones.

The company has 12 open positions and plans to add up to 60 jobs this year, on top of its work force of 120, FitzGibbon said. It is analyzing the needs of specific departments to avoid overloading any single employees and determine where hiring is most needed.

"The last thing we want to do is have a software developer completely burned out," he said.

FitzGibbon's inclination to step up hiring reflects a broader trend. The economy has added an average of 200,000 net jobs per month from November through January. That job growth has helped lower the unemployment rate for five straight months to 8.3 percent. Economists predict that more than 200,000 net jobs were added in February, too.

A return to more robust hiring ultimately leads to higher wages and more consumer spending, which fuels economic growth.

One concern is that labor costs are rising and might be building inflation pressures. Such costs rose at a revised 2.8 percent annual rate in the October-December quarter. That's less than the 3.9 percent increase in the July-September quarter. But it's more than twice the initial estimate of labor costs for the fourth quarter.

Rising labor costs could force businesses to raise prices. Still, some economists say higher prices wouldn't likely be sustained as long as nearly 13 million Americans remain unemployed and others aren't being paid enough to keep up with inflation.

"Companies are likely to cover the higher labor costs by trimming their profits rather than raising the prices of their products," said Richard DeKaser, a senior economist at the Parthenon Group.

Next: AP Survey: More Optimism About U.S. Jobs And Economy

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The factual statistics of the economy is universal among truthful and trusting economist, who report the sad numbers which is serious enough to call it a depression. This economy is consumer driven in every aspect...the scam is to repeat over and over that happy days are here again when no such thing exist. Just to make it back to zero from minus 20 million, we need to create 20 million jobs...we have nothing that will create 20 million jobs nor will we ever have anything that can create 20 million jobs except 1...bring all the jobs back and that simply will never happen. It is not that the happy days economist are stupid, it is simply all that is left, is to constantly BS the consumer into spending because we are a consumer driven economy....and if we spend...the economist get to keep their job.

March 11 2012 at 9:06 PM Report abuse +1 rate up rate down Reply

Consumers are spending more because they have too, as prices begin to rise with uncontrollable market speculation mostly to blame over record low interest rates and Ben Bernakes practice of QE resulting in out of control inflation starting at the pump and eventually leading to the shelf, unless change is made SOON to control that by increasing rates to at least 5.5% another recession is unavoidable within the next 18 months.

March 11 2012 at 8:58 PM Report abuse +3 rate up rate down Reply

don't believe everything uou read.

March 11 2012 at 5:56 PM Report abuse rate up rate down Reply
1 reply to candalou2's comment

Especially when you write it and misspell your words.

March 11 2012 at 7:25 PM Report abuse +1 rate up rate down Reply

Couldn't they have just continued to demand more productivity from the employees they have, while at the same time reaping historic after tax profits as they reward the top executives like they have been every single quarter since Oct.. 2009 ? http://research.stlouisfed.org/fred2/series/CP

Before I retired in 2007 my employer had been demanding more from fewer workers for about 5 years. This seems to have become the norm for the last decade or so.And I'm kind of surprised they are changing course now.

March 11 2012 at 5:27 PM Report abuse rate up rate down Reply

As usual, full disclosure is not on the menu of the business and financial sector; or the people that report it.

The truth behind the numbers is this:

The writer states, "Rising labor costs could force businesses to raise prices. Still, some economists say higher prices wouldn't likely be sustained as long as nearly 13 million Americans remain unemployed and others aren't being paid enough to keep up with inflation."

I say, EXCUSE ME!! Businesses are over-contributing to the jobless situation, then taking advantage of it to increase profits.

Follow me closely here because I am watching this happen at my workplace:
Through massive layoffs due to slowing sales, they pared down the labor force to LESS than a bare minimum. Then the company plays the shell game; shifting around worker positions and titles to reduce their wages; therefore increasing profits for the stockholders (How else could stockholders continue to make even larger returns and executives make larger bonuses during a recession?). Workers put up with the cuts in pay just to keep their jobs. Next the companies demand higher productivity from those same reduced wage workers (now one worker is doing the work of two or three); and again, the workers put up with it just to keep a job. Through all this, the price of most all goods went up, while low level workers' wages went down. The continuing "inflation" is totally stockholder driven. Their demand for that double-digit return on their investments (translation: greed) has put a stranglehold on the low to middle wage earner while they make more than ever before. So there's your 'DUH-HUH' to the statement from the economists in the second sentence.
Then the article goes on to say:
"Companies are likely to cover the higher labor costs by trimming their profits rather than raising the prices of their products," said Richard DeKaser, a senior economist at the Parthenon Group.

I say: You know what? I REALLY feel sorry for them (NOT!). If they would have not been so greedy in the first place, we would not have had as deep a recession because less people would have been laid off, wages would not have gone down as far, therefore people could have better afforded to continue to purchase products and services, and the stockholders would have made more returns in the long run.

March 09 2012 at 5:04 PM Report abuse +2 rate up rate down Reply

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