Employers test economic waters before hiring

By Leah Schnurr

NEW YORK (Reuters) – U.S. companies are dusting off their “help wanted ” signs but the pipeline of new jobs is being filled at only a trickle.

After slashing jobs swiftly in response to the cratering economy and credit crisis of 2008 and 2009, employers are treading cautiously, waiting for clear signs of economic improvement and that their own sales can be sustained.

Many firms find themselves in a catch-22 situation: They are wary of having too many staff if the recovery slows but don’t want to be caught short-handed if business takes off.

For many, it boils down to simple math — if the revenues are there, they will hire. That means job openings will likely be gradual rather than broad-based.

“As long as there are clients interested in wanting to hire us, we’ll continue to hire people,” said Mike Lieberman, the head of Philadelphia-based firm Square 2 Marketing.

His company, which designs and handles marketing campaigns for entrepreneurs, has taken on two new employees this year, bringing its staff up to 14. Lieberman says the company will probably hire three or four more people in 2011 but will first have to see if revenue meet targets.

“It is, of course, the chicken and the egg — do you hire more so that you can sell more, or do you generate more sales until you’re comfortable hiring?” said Rafael Pastor, chief executive of Vistage, a organization of business executives.


As conditions improve, economists expect hiring growth will come in large measure from small and medium-sized companies, such as Square 2 Marketing, helping to offset expected job losses in the cash-strapped public sector.

Recent jobs data has been encouraging. Employers hired workers at the fastest pace in nine months in February, according to government data, and other economic releases have shown employment gauges rising.

Last month, manufacturers’ willingness to hire improved at its strongest pace in decades, while small firms began creating jobs in February.

Data on Thursday suggested the improvement in the labor market was becoming sustained. New claims for jobless benefits edged down to 382,000 last week, and the four-week moving average of new claims dropped to its lowest level in more than 2-1/2 years.

A reading below 400,000 is seen as a sign of steady job growth. Ian Shepherdson, chief U.S. economist at High Frequency Economics, said he expects the number to fall to 300,000 by the end of the year.

So far, the U.S. economy has restored only a fraction of the 8 million jobs lost during the recession, and economists see only continued slow progress.

“In a typical very sharp recession followed by boom recovery, we would have seen a lot more progress. We would have seen nearly all the jobs lost in the recession restored by this point,” said Geoff Somes, senior economist at State Street Global Advisors.

One reason the recovery in the labor market has been unusually slow is the ability of companies to stretch their existing workers. But firms could soon hit the limit of how far that can go. Growth in nonfarm productivity peaked at an 8.9 percent annual rate in the second quarter of 2009, but has since slowed, coming in at 2.6 percent in the fourth quarter of last year.

Liz Ryan, a human resources adviser who runs a website offering career advice, is seeing signs that some employers who have long put off hiring are finally finding that they can wait no longer.

“They don’t post a job the minute it occurs to them, they wait months. That hiring manager makes that long walk down the hall to the CFO or the money guy six, eight, 12 times and then they end up literally begging,” said Ryan.

“The decision processes aren’t necessarily shorter. They’re still talking six weeks, which is frustrating for job seekers, but the urgency is becoming more apparent,” Ryan said.

Many looking for employment are probably still in for a long wait. Executives are likely to keep an eye on the tensions in the Middle East and North Africa, which have pushed up energy costs, as well as the possible impact on global growth from the earthquake and nuclear crisis in Japan.

For others, though, now is exactly the time they want to be growing. San Diego-based Cart Mart, which sells electric commercial vehicles such as golf carts, currently has three jobs open and is looking to expand to other regions.

“What we’re finding is that the industry is expanding as the economy does improve and companies are looking to improve their operations and become more efficient,” said Cart Mart’s chief executive, Brian Rott.

“I am certain all of the uncertainties are gone. It’s now back to business.”

(Reporting by Leah Schnurr’ Editing by Leslie Adler)

Employers test economic waters before hiring