Dragged down by cuts in defense spending and corporate belt-tightening, the U.S. job market still seems mired in mud. Even though the economy is expanding, the number of white-collar jobs has remained almost flat since the beginning of 1992. And the latest report from the Bureau of Labor Statistics (BLS) shows that manufacturing jobs are continuing to disappear at a distressing rate.
But there's good news from one part of the employment front. Largely unnoticed, a group of high-paying, white-collar industries, which were battered early by the recession, has started hiring in recent months. Such business services as advertising, management consulting, securities and commodities brokering, and, to a lesser extent, legal services and accounting are all expanding again, after an unprecedented loss of jobs over the past few years.
These service industries--dominated by small and medium-size companies--are adding workers, even while other parts of the economy continue to chop them. Banking is still shedding jobs at a rapid rate, with no end in sight. Defense cuts are taking their toll on engineering and technical personnel. And big outfits such as General Motors Corp. and IBM are promising to take more chunks out of their white-collar work force.
VROOM. The revival of job growth in business services--which propelled the boom of the 1980s--will play a key role in boosting the overall economy. The biggest winners will be such cities as New York and Chicago, where such jobs are concentrated.
The employment gains in business service don't show up in the well-publicized monthly BLS report. But a BUSINESS WEEK analysis of government job data on specific industries reveals just how strong the upturn has been. Over the past six months, the securities industry has been expanding at a 7.4% annual rate (chart)--almost as fast as it did during the go-go '80s. Firms providing management consulting and other services, excluding self-employed consultants, have been adding jobs at a 6.5% rate. Even advertising, which was hard hit by falling sales last year, has regained two-thirds of the jobs it lost from 1989 to 1991.
While the rest of the private sector has not grown at all, these industries in total have gained about 60,000 jobs over the past year. And in purchasing power, this increase is equivalent to a rise of 120,000 jobs, because the jobs in these industries are among the best-paid in the U.S., with wages and salaries about double the national average. Indeed, taken together, these industries now account for a bigger share of wages and salaries than the automobile, chemical, and steel industries combined. For that reason, increased hiring by business services gives a disproportionately big boost to the national economy.
Job-hunting in business services, while still rough, has become much easier. Adweek's help-wanted index for advertising, marketing, and media jobs is up about 25% over last year. By contrast, the Conference Board's index of help-wanted listings across the entire economy is flat. Right Associates, a Philadelphia outplacement firm, reports that business services are hiring far more people than they are cutting. And executive headhunters are also reporting a pickup. Says Joan Zimmerman, executive vice-president at G.Z. Stephens, recruiters for the securities industry: "We're seeing hiring across the board."
Many law and accounting firms, which either cut jobs or hired very cautiously during the recession, are stepping up recruitment of new graduates. For example, Skadden, Arps, Slate, Meagher & Flom, the big New York law firm, is hiring 25% more summer associates than it did a year ago, says executive partner Peter P. Mullen. "We saw a turning point in July," says Jane Thieberger, assistant dean for placement at New York University's School of Law. "An increased number of law firms are starting to do hiring." At accounting giant Price Waterhouse, entry-level hiring is up about 10% this year. Says Larry Scott, national recruiting director: "This is real."
In part, these hiring gains are the natural rebound from a disastrous recession. In 1981-82, employment in business services kept growing right through the downturn in the rest of the economy. They seemed immune to the business cycle. But this time, they were among the first hit by the slump, helping set the tone of the "white-collar recession." The number of advertising and accounting jobs, for example, peaked in the fall of 1989, well before the recession's official start in July, 1990.
`SO THIN.' Many firms tightened their belts so hard they pinched, especially once business began to pick up early in 1992. Fearing the worst, law and accounting firms had cut back hiring more than the actual fall in business warranted. "We dropped down somewhat lower in employment than we wanted to be," admits Mullen of Skadden Arps. And advertising, which went through a wave of restructuring and cost-cutting, is even leaner. Edward R. Koller Jr., president of the Howard-Sloan Koller Group, a recruiter in advertising, says ad agencies "are so thin they can't get any more out of their people."
These industries will keep adding jobs as the economy expands, since the demand for legal, advertising, and accounting services rises with the gross domestic product. Securities firms, which expect near-record earnings this year, will continue to hire. And consultants and other outside professional firms will benefit from the white-collar cutbacks across the rest of the economy, since many companies have chopped staffs so much that they have to farm out work formerly done in-house.
The rebound in business services will be a much needed tonic for the country's biggest cities, which have suffered badly from the recession. New York, Chicago, and Los Angeles together have 10% of all jobs in the country. But they have about half of all jobs in the securities industry, about one-third of all advertising jobs, and about 20% of all law and accounting jobs.
New York City's economy, in particular, rises and falls with these industries, which make up about 20% of the income generated in the city. BUSINESS WEEK's analysis of BLS data shows that starting this summer, the number of securities-industry jobs in New York City began to rise for the first time since the 1987 crash. New York City law firms, too, are starting to add to their payrolls.
Along with high-tech, business services are at the core of the modern U.S. economy. They are among the few sectors in which America has a clear global competitive advantage. When they prospered in the 1980s, the country grew, and when they struggled, so did everyone else. That's why recovery from the recession has proved extraordinarily difficult. The hiring rebound in business services may signal that the end to the long slump is finally in sight.