March 13 (Bloomberg) -- The last time U.S. factory workers put in longer weeks than they averaged in February, Rosie the Riveter was on the assembly line and American GIs were fighting Nazis in Europe.
All those extra hours helped to drive five straight months of manufacturing growth in the U.S., racking up 52,000 new factory jobs, according to Labor Department data. That includes 14,000 positions in February alone.
“The workweeks are very, very, very long right now, on a historical basis,” said Michael Montgomery, U.S. economist at IHS Global Insight in Lexington, Massachusetts. “That’s why you’re seeing job growth in manufacturing. When you have to start to pay people time and a half, and you have the volume of business, you can justify hiring people.”
The strongest U.S. auto industry since 2007 is benefiting companies such as American Axle & Manufacturing Holdings Inc., which by year-end will add 400 more people at one of its Michigan factories. Transportation and metal fabrication industries make up a majority of the job gains since September as auto sales rebounded more quickly than housing from the U.S. recession that ended in 2009.
With housing and other industries starting to join autos in supporting manufacturing, the job gains are looking more sustainable, Montgomery said. New-home sales jumped in January to the highest level since July 2008 as buyers took advantage of mortgage rates close to all-time lows, Commerce Department data showed on Feb. 26.
Production workers averaged 41.9 hours a week in February, Labor Department data showed last week. That tied December 1997 and January 1998 as the most since May 1944, when full wartime production was pulling more women into factories, as symbolized by the Rosie the Riveter character in posters, song and film. The record was 45.4 hours in January and February 1944.
The hours were included in a report showing that employers added 236,000 workers to payrolls and that the jobless rate fell to 7.7 percent, a four-year low.
If the demand stays steady, employers will be forced to considering hiring for future needs, not just for immediate openings, said John Challenger, chief executive officer of Challenger Gray & Christmas Inc., an employment consulting firm based in Chicago.
“This has been the classic start-and-stop recovery, so people were reluctant to hire,” Challenger said in an interview. “We are seeing a surge right now. As employers say ‘It’s costing us too much, we’re losing talent, other companies may get the talent before we do, so we better get out in front of this,’ that leads to more hiring.”
Supporting the notion, the Labor Department yesterday said employers in January fired the fewest workers since it started tracking the data 12 years ago, while job openings rebounded.
Among companies Challenger included in his measures of job growth in the last several months was a unit of Tsubakimoto Chain Co., a Japanese maker of engine and transmission parts adding 70 jobs in a $1.9 million expansion in Portland, Tennessee. Chrysler Group LLC invested $374 million to add 1,250 jobs to Indiana factories for fuel-saving transmissions.
American Axle’s 800,000-square-foot plant in Three Rivers, Michigan, will grow to 1,500 workers this year as part of a $100 million investment to add powertrain parts for a new crossover vehicle, said Chris Son, a spokesman for the Detroit-based company.
With the new staff, employment will have doubled from 750 at the beginning of 2012. The factory, which makes axles and other products for pickup trucks such as General Motors Co.’s Chevrolet Silverado, started this year with 900 workers and had already increased that to 1,100 by this week.
A majority of U.S. auto suppliers say they will need to hire more hourly and salary workers this year to meet demand, said David Andrea, a senior vice president for the Original Equipment Suppliers Association. Some 62 percent said they are already running extra shifts or otherwise altering the workweek to get more hours out of existing workers.
GM, Ford Motor Co. and Chrysler sales have surged since the 2009 recession, when GM and Chrysler were bailed out in an $80-billion government rescue program. Ford, which didn’t take government funds, relied on $23 billion in private financing and labor cuts.
U.S. auto sales may rise to 15.1 million this year from 14.5 million last year, the average estimate of 18 analysts surveyed by Bloomberg in January. They hit a 25-year low of 10.4 million in 2009.
The auto industry contributed 14 percent of the 2.1 percent average rate of growth for gross domestic product in the recovery that began in the third quarter of 2009 to the fourth quarter of 2012, according to data from the Commerce Department.
The hiring gains may be at risk later this year if long-term GDP growth doesn’t start to move beyond the 2 percent increase seen in productivity, said Robert Dye, chief economist for Comerica Inc. in Dallas. GDP needs to rise to closer to 3 percent or 3.5 percent to create a more sustainable demand for workers, he said.
“Typically, manufacturing is not a net job adder to the U.S. economy, over the long term, even in an expansion cycle, because it is a high-productivity industry,” Dye said, pointing to expansions in the 1990s and 2000s. “There tend to be many areas that can be automated and technology can be brought to bear to reduce the amount of labor required.”
Another potential nudge to raise hiring is that wages as a percentage of GDP are near a record low, Labor Department data show. From the early 1950s until 1975, wages were at least 50 percent of GDP. They hit a record low of 43.6 percent in last year’s third quarter and ended the year at 43.9 percent.
“We’ve reached a point where they can’t really reduce wages anymore,” Howard Ward, chief investment officer at Gamco Investors Inc., said in a March 11 interview on Bloomberg Television’s “Surveillance.” “That’s not all bad because now they’ve got to go out and they have to pay more and they have to hire more people and ultimately that’s going to be good for the economy and good for the stock market.”
The economy may gain momentum as the year goes on, helped by further advances in home construction. GDP may climb at a 2.1 percent annual rate in the second quarter, before picking up to a 2.5 percent pace in the third and 2.8 percent in the year’s final three months, according to the median projection of economists surveyed by Bloomberg from Feb. 8 to Feb. 13.
The growth has help buoy U.S. stocks. The Standard & Poor’s 500 Index has risen 8.9 percent so far this year.
Companies ramped up hiring toward the end of 2012, a sign they’re finding it difficult to make do with the existing staff as sales increase. A pickup in consumer and business spending last quarter -- even as the economy stalled due to a plunge in defense outlays and slower stockpiling -- also will help to improve the job market this year.
Hiring accelerated in the fourth quarter, when job gains averaged 209,000 a month, compared with 152,000 from July through September, according to Labor Department data.
Sales at U.S. retailers jumped 1.1 percent in February, twice as much as forecast, showing improving job prospects are helping consumers and the economy overcome higher taxes and gasoline prices. It was the biggest gain in five months, according to Commerce Department figures issued today.
This year, outside of autos, the broader jobs outlook is being helped by inventory rebuilding, foreign orders and housing gains, said Montgomery, the IHS economist.
“February is really a double positive because you have the good number of people but also the increase in the workweek,” Montgomery said. “It’s not a boom by any stretch, but good, solid workmanlike growth after a lull of six to nine months.”
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