Lackluster growth in U.S. jobs

U.S. employers last month added the smallest number of jobs in more than two years. But don’t tell that to Mike Kovach.

Kovach recently added four workers to his staff of 80 at his thriving industrial manufacturing plant in Youngstown, Ohio. And he plans to hire more in coming months.

“Anyone who’s worth their salt is definitely working but maybe not totally happy with their job, and that’s the sort of people we’re looking for,” Kovach said, revealing his strategy for stealing workers from competitors.

Employers like Kovach are part of what analysts say is a split job market -- one in which some sectors are struggling to find enough skilled workers while other sectors are slowing hiring or cutting jobs.

Employers who have seen gains in worker productivity during the 6-year-old expansion are hanging on to skilled workers they’ve trained and trying to find more, especially because many analysts see economic growth picking up this year. That’s true even for employers such as Kovach, whose sector of manufacturing has been shedding jobs.

Housing and housing-related employers, such as home-improvement retailers and mortgage lenders, are curbing job creation or handing out pink slips amid the nation’s housing slump.

The net effect is a paradox: below-average job growth with an unemployment rate near historic lows.

The economy added a sub-par 88,000 jobs in April, the smallest monthly gain since November 2004, the Labor Department reported Friday. That was less than the 100,000 most economists expected and far less than the 190,000 monthly average seen last year and during the boom of the 1990s.

Job creation in March was revised lower, to 177,000 from the original estimate of 180,000.

Manufacturers eliminated 19,000 jobs last month, more than the 14,000 economists had expected. Retailers reduced payrolls by 26,000, builders by 11,000.

Yet the unemployment rate rose only slightly last month, up to 4.5% from 4.4%, a five-year low. This late in an expansion, most analysts expect unemployment to be higher than 5%.

With a tight job market and expectations that economic growth will pick up steam this year, many analysts predict unemployment won’t rise beyond 5% this year.

“Employers are going to continue to hire. They will be hiring at a slower pace this year than they were last year, but they’ll keep hiring,” said Nigel Gault, U.S. economist for research firm Global Insight in Waltham, Mass. “The labor market will probably stay quite tight, and there’s still going to be a problem for employers looking around for skills.”

The Federal Reserve’s most recent regional economic survey reported “tight labor market conditions” in most areas of the country between late February and mid-April, leading to slightly better pay and benefits for many workers.

Workers’ average hourly earnings rose 0.2% last month after a 0.3% increase in March, the Labor Department reported. Average weekly earnings were up 3.7% from a year earlier.

“Businesses have to bid up wages to get more workers. For workers, that’s great,” said Joel Naroff, president of Naroff Economic Advisors in Holland, Pa.

Ohio manufacturer Kovach has already been staffing up and wants more. The president of City Machine Technologies has been trying to find 15 skilled workers to add to the mechanics, welders and machinists he already lured away from other employers. “What we’re trying to do now is develop a little better workforce -- a little younger, a little more computer literate,” Kovach said.

The tight job market has been great for Dan Hageman. Hageman, 23, was hired as a mechanic at Kovach’s Youngstown plant three months ago, leaving a job at a window manufacturer whose sales suffered because of the housing slump.

He’s earning more with better benefits at his new job but has friends at a nearby General Motors Corp. plant who are worried they may get laid off.

“I was fortunate, I have enough skills I could get in” to a new job, Hageman said. “Not everybody does.”

During the recent economic expansion, employers like Hageman’s saw early gains in productivity, mostly through technology that allowed them to produce more with fewer workers. As a result, many invested more in capital than labor and reaped record profits.

But as productivity growth lagged during the last year, some employers have been forced to hire more workers to maintain the same output, spending more to recruit skilled workers and effectively sharing more of the gains from growth, said Global Insight analyst Gault.

More than half of the members of the National Federation of Independent Businesses tried to hire more workers during the last three months, according to a survey released last week.

In addition, 13% plan to expand their workforce in coming months. That’s less than during the dot-com era of the late 1990s, but on par with the expansion of the 1980s, according to the group’s chief economist, Bill Dunkelberg.

The main threat to growth is weaker consumer spending. Although spending rose 3.8% this year, a report last week showed personal spending was less than expected in March, and some economists predict consumers will wait to make major purchases until they’re sure housing has rebounded.

Consumer confidence fell in April from 108.2 to 104, according to the Conference Board. Consumer confidence in the job market remained relatively unchanged for the year as of April, but Friday’s jobs report could still have a chilling effect, said Conference Board economist Ken Goldstein.

“The danger is that numbers like this could lead to less consumer confidence, leading to consumers cutting back a bit and less hiring down the road,” he said.

But, he added, “I don’t think that will happen but that’s a possibility, especially if we got another number like this next month.”

molly.hennessy-fiske@latimes.com