Factory workers put in most hours since 1944

Overtime, extra shifts lead employers to hire more

Bloomberg NewsMarch 14, 2013 

Business Inventories

Workers assemble cars along a line at the General Motors Fairfax plant in Kansas City, Kan. The Commerce Department said Wednesday that U.S. companies increased their restocking in January from December, an encouraging signal that companies expect consumers will spend more this year.


— 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 United States, 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, Mass. “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, 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.

Jobless rate at 4-year low

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, 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 said Tuesday that employers in January fired the fewest workers since it started tracking the data 12 years ago, while job openings rebounded.

Jobs in auto industry

Among companies Challenger included in his measures of job growth in the last several months was a unit of Tsubakimoto Chain, a Japanese maker of engine and transmission parts adding 70 jobs in a $1.9 million expansion in Portland, Tenn. Chrysler 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, Mich., 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’ 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 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.

Wages near record low

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, said in an 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.”

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