CHICAGO – March 23, 2011 – After two years of painful contraction, construction executive Jim McShane is hiring again, seeking out accountants, property managers and engineers for projects ranging from offices and schools to medical-care facilities and affordable housing.
But he is moving with extreme caution, watching the unemployment rate to gauge whether the economic recovery has legs. And he is blown away by the deluge of applicants.
“We advertised for a project engineer and had over 400 applicants ... and many had five to 10 years of experience,” said McShane, chief executive of The McShane Cos., based in Rosemont, Ill. “It was staggering, just staggering.”
Many employers, in Chicago and elsewhere, are hiring again, easing fears that the economic recovery will be jobless. Among the more hopeful signs: The unemployment rate has slipped below 9 percent for the first time in nearly two years.
“The jobs picture looks like it’s at a turning point,” said former Federal Reserve governor Randall Kroszner, a University of Chicago economics professor. His forecast is now “partly sunny with a threat of intense storms,” an upgrade from his “partly cloudy with a threat of intense storms” prognosis late last year.
But deep wariness remains among observers who predict a long road back to fuller employment – a path that could take several years to traverse. The housing market remains moribund, the auto industry is anemic and the Middle East is in turmoil, sending oil prices upward. Worries about government fiscal stress and about future health care costs persist. And federal stimulus money is tailing off.
“I’ll acknowledge an improved economic environment, but I doubt if it’s sustainable in the second half of the year,” said Donald McNeeley, president of Chicago Tube & Iron, which supplies power plants, missile projects and heavy machinery makers.
“We’re hiring in very specialized areas, specifically in engineering and cold welding, but very slowly,” he said. The Romeoville-based company may add 25 positions to its workforce of 400 this year, but that’s still off its prerecession peak of 500 employees.
Debate has swirled over whether the country will return to prerecession rates of economic growth and unemployment, or whether a “new normal” will emerge, as has been suggested by executives at Pimco, a huge investment management firm with deep expertise in bonds. This post-recession world would be marked by slower growth, higher unemployment and greater odds of systemic shocks.
Not everyone is buying the pessimistic outlook. “I don’t want to be Pollyanna-ish for recovery, because there are risks,” Kroszner said, “but broadly speaking, if there is not a major event or major glitch, then I think moderate recovery is likely.”
But Tony Crescenzi, a Pimco strategist, thinks a “new normal” will be felt in some key industries, notably housing and autos.
“The construction industry lost 2 million jobs in the recession, during a period when housing starts fell from 2 million, annualized, to half a million,” he said. He expects starts to remain close to that reduced level.
“That means most of the 2 million who lost those jobs lost them for good,” Crescenzi said.
One local homebuilder who survived the bust and returned to profitability last year agrees that it is unrealistic to expect a redux of the prerecession high times in residential real estate.
“We may never see that again,” said Kevin Davis, president of the Chicago and Milwaukee division of William Ryan Homes. The division is down to about 10 employees, from about 50 in headier times, and Davis hopes to hire four staffers this year.
Housing “will be a laggard in recovery because of the amount of people underwater,” he said. In Illinois, 21.7 percent of homeowners with a mortgage owe more on their homes than the properties are worth, according to CoreLogic, a Santa Ana, Calif., provider of real estate data.
The auto industry, which lost 500,000 jobs during the recession, has seen some stabilization but sales remain significantly below peak levels. Crescenzi expects that to continue. Financing remains difficult to get for many consumers, and others continue to shy away from taking on more debt, he said.
Looking ahead, a survey of 18,000 employers by Manpower Inc. indicates increased willingness to hire in the second quarter, with 16 percent saying they plan to add staff, up from 14 percent in the first quarter. Hospitality, professional services, manufacturing and retail were among the most optimistic sectors.
Copyright © 2011 Chicago Tribune.
But he is moving with extreme caution, watching the unemployment rate to gauge whether the economic recovery has legs. And he is blown away by the deluge of applicants.
“We advertised for a project engineer and had over 400 applicants ... and many had five to 10 years of experience,” said McShane, chief executive of The McShane Cos., based in Rosemont, Ill. “It was staggering, just staggering.”
Many employers, in Chicago and elsewhere, are hiring again, easing fears that the economic recovery will be jobless. Among the more hopeful signs: The unemployment rate has slipped below 9 percent for the first time in nearly two years.
“The jobs picture looks like it’s at a turning point,” said former Federal Reserve governor Randall Kroszner, a University of Chicago economics professor. His forecast is now “partly sunny with a threat of intense storms,” an upgrade from his “partly cloudy with a threat of intense storms” prognosis late last year.
But deep wariness remains among observers who predict a long road back to fuller employment – a path that could take several years to traverse. The housing market remains moribund, the auto industry is anemic and the Middle East is in turmoil, sending oil prices upward. Worries about government fiscal stress and about future health care costs persist. And federal stimulus money is tailing off.
“I’ll acknowledge an improved economic environment, but I doubt if it’s sustainable in the second half of the year,” said Donald McNeeley, president of Chicago Tube & Iron, which supplies power plants, missile projects and heavy machinery makers.
“We’re hiring in very specialized areas, specifically in engineering and cold welding, but very slowly,” he said. The Romeoville-based company may add 25 positions to its workforce of 400 this year, but that’s still off its prerecession peak of 500 employees.
Debate has swirled over whether the country will return to prerecession rates of economic growth and unemployment, or whether a “new normal” will emerge, as has been suggested by executives at Pimco, a huge investment management firm with deep expertise in bonds. This post-recession world would be marked by slower growth, higher unemployment and greater odds of systemic shocks.
Not everyone is buying the pessimistic outlook. “I don’t want to be Pollyanna-ish for recovery, because there are risks,” Kroszner said, “but broadly speaking, if there is not a major event or major glitch, then I think moderate recovery is likely.”
But Tony Crescenzi, a Pimco strategist, thinks a “new normal” will be felt in some key industries, notably housing and autos.
“The construction industry lost 2 million jobs in the recession, during a period when housing starts fell from 2 million, annualized, to half a million,” he said. He expects starts to remain close to that reduced level.
“That means most of the 2 million who lost those jobs lost them for good,” Crescenzi said.
One local homebuilder who survived the bust and returned to profitability last year agrees that it is unrealistic to expect a redux of the prerecession high times in residential real estate.
“We may never see that again,” said Kevin Davis, president of the Chicago and Milwaukee division of William Ryan Homes. The division is down to about 10 employees, from about 50 in headier times, and Davis hopes to hire four staffers this year.
Housing “will be a laggard in recovery because of the amount of people underwater,” he said. In Illinois, 21.7 percent of homeowners with a mortgage owe more on their homes than the properties are worth, according to CoreLogic, a Santa Ana, Calif., provider of real estate data.
The auto industry, which lost 500,000 jobs during the recession, has seen some stabilization but sales remain significantly below peak levels. Crescenzi expects that to continue. Financing remains difficult to get for many consumers, and others continue to shy away from taking on more debt, he said.
Looking ahead, a survey of 18,000 employers by Manpower Inc. indicates increased willingness to hire in the second quarter, with 16 percent saying they plan to add staff, up from 14 percent in the first quarter. Hospitality, professional services, manufacturing and retail were among the most optimistic sectors.
Copyright © 2011 Chicago Tribune.
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