Manufacturing and mining are set to power U.S. job gains again this year, from auto assembly plants in Ohio to the oil and gas fields of North Dakota.
The two industries combined helped spark the biggest annual job gains for the economy in five years in 2011, with factory payrolls expanding the most in 14 years and mining adding more jobs than any period in the past three decades, according to Labor Department figures.
Economists Peter Cappelli and John Silvia say those gains are likely to be extended in 2012. The improvement may spread beyond factory floors and hydraulic fracturing, or fracking, used to drill for oil: retailers, the leisure industry and even construction may also benefit.
Last year’s employment increases “are good signs for this year,” said Cappelli, a labor economist and director of the Center for Human Resources at the University of Pennsylvania’s Wharton School. “Manufacturing is the most important story because it has spillover effects on other industries in a way that services may not.”
The pace of job growth at service producers that account for about 85 percent of all employment was a step behind the 1.3 percent annual increase in total payrolls. Further progress in the labor market would help bolster incomes and spur consumer spending, which accounts for 70 percent of the world’s largest economy.
Employers added 1.64 million workers in 2011, the best year for the American worker since 2006, after a 940,000 increase in 2010.
Path for Gains
“We’re on a good path here for job gains,” said Silvia, chief economist at Wells Fargo Securities LLC in Charlotte, North Carolina. “It’s part and parcel of an economy that’s improving at a pretty decent pace.”
Even with two years of growth, “we’re still a long ways away” from recovering the 8.75 million jobs lost as a result of the recession that ended in June 2009, said Silvia, a former economist at the Joint Economic Committee of Congress.
Weakness in Europe also poses a risk to the U.S. Germany, the continent’s largest economy, shrank about 0.25 percent in the fourth quarter from the previous three months, the Federal Statistics Office in Wiesbaden said today in an unofficial estimate.
The effects of Europe’s debt crisis may cost the U.S. as much as half a percentage point in economic growth this year, Jan Hatzius, chief economist at Goldman Sachs Group Inc., said at an event in Frankfurt today.
Stocks fell amid concern Europe’s slowdown will stifle global growth. The Standard & Poor’s 500 Index dropped 0.2 percent to 1,290.11 at 10:50 a.m. in New York.
U.S. factories took on additional 225,000 workers, the most since 1997, the Labor Department reported Jan. 6. Ford Motor Co., the second-largest U.S. automaker behind General Motors Co., is among manufacturers projecting a brighter employment picture.
“Looking ahead, we do expect improved job and income gains associated with better performance” in the economy, Ellen Hughes-Cromwick, Ford’s chief economist, said on a Jan. 4 conference call with analysts.
Auto purchases in the U.S. this year will be in the 13.5 million to 14.5 million range, consistent with economic growth of 2 percent to 3 percent, she said. Sales in 2011 reached 12.8 million, the best year since 2008.
Payrolls in mining last year rose by 89,300, the most since 1981 and up 13 percent from 2010. Oil and gas extraction accounted for 25,200 of those jobs, the biggest gain in 30 years.
Oil and Gas
The employment figures also show how the economy is changing, Cappelli said. Job growth in mining reflects new discoveries, particularly of natural gas deposits, while gains in the retail, leisure and construction industries are evidence of improving confidence and a recovery in the purchasing power of American consumers, he said.
Since 2005, oil production in North Dakota has nearly quadrupled, while employment in mining, quarrying, and oil and gas extraction has increased 185 percent, according to a December report by IHS Global Insight.
Producing natural gas from shale will support 870,000 U.S. jobs and add $118 billion to economic growth in the next four years, IHS Global said in another report last month.
The natural gas drilling boom is behind the reopening of a factory in Youngstown, Ohio, that will have 350 workers and produce seamless pipes used in fracking. The mill for Vallourec SA’s V&M Star is part of a development that an oil and gas industry study calculates will mean more than 200,000 jobs and $22 billion in economic output in Ohio by 2015.
The jump in mining and manufacturing jobs, underpinned by the leading role factories played in contributing to the economic recovery, indicates rising demand for skilled, higher- paid workers, Wells Fargo’s Silvia said. A “tick up” in these industries, and in health care and information technology, will boost wage levels and help accelerate the expansion, he said.
“The people getting hired are the ones with more skills,” said Silvia. “These are not your traditional assembly-line, turn-a-screw kind of jobs like we had in the 1950s and ‘60s.”
Among other industries that showed a pickup in jobs, retailers took on 239,700 employees in 2011, the most since 1999. A 268,000 increase last year in leisure and hospitality workers was the biggest since 2006.
Another part of the economy showing signs of stabilization is housing, which may keep headcount from deteriorating. Construction companies added 46,000 workers last year, the first gain since 2006, Labor Department data showed. Employment tied to home building increased by 3,600 last year, the first annual advance since 2005.
Industries that experienced a spurt in payrolls last year may bolster confidence among other employers about hiring.
“A lot of employers make decisions at least in part by looking at what everybody else is doing in the industry,” Cappelli said. “So in each of these industries, the fact that hiring is going up is a confidence builder if you’re an employer in that industry.”
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