Employers Adding Lots of Overtime, Not Jobs

Phil Raimondo is asking employees at his factories to put in longer hours to meet demand as the U.S. economy recovers.

Orders waiting to be filled have surged 25% in the last three months at Behlen Manufacturing Co., which makes structures for the building of offices, shopping malls, aircraft hangars and livestock equipment.

That doesn’t mean Raimondo, the company’s president and chief operating officer, is rushing to put the help-wanted sign back in the window.

“Business is picking up, but we are responding to that very cautiously,” he said.

Companies such as Behlen and auto-parts maker Delphi Corp. are meeting production demands by boosting overtime instead of adding to payrolls. That suggests many of the 1.7 million factory workers who lost their jobs since the manufacturing recession began in August 2000 will have to wait months before finding employment.

Rising overtime “is a positive sign that orders and production are picking up, but it also tells you there is a certain wariness about its sustainability,” said Stuart Hoffman, chief economist at PNC Bank in Pittsburgh.

“It probably takes several more quarters of stable to rising demand before you start to see new hiring,” Hoffman said.

The reluctance of some companies to hire helps explain why Federal Reserve policymakers probably will keep the benchmark overnight bank lending rate at a 40-year low of 1.75% to sustain the economic rebound when they meet Tuesday.

Average weekly manufacturing overtime jumped to 4.2 hours in March, the highest in 14 months, from 3.9 hours in February even as factories cut 38,000 jobs, Labor Department data showed last month.

The April employment report probably will show that factories eliminated an additional 20,000 jobs in April, according to the median of 16 forecasts in a Bloomberg News survey.

Companies have boosted overtime at a faster rate than they did after the 1990-91 recession. Four months after reaching a low of 3.7 hours in November 2001, average weekly overtime has increased by 30 minutes. That compares with an overtime increase of 18 minutes in the four months that followed the end of the last recession in March 1991.

At Columbus-based Behlen, overtime in the three months that ended in April is up about 20% compared with the previous three months.

By contrast, payrolls are up 7% since October, the month Behlen was forced to make a second round of layoffs as the recession deepened after the terrorist attacks. Still, the company has 1,330 workers on its payroll, down from almost 1,450 employees in the summer of 2000.

“Where we are sure we will see some sustainability in business, we are hiring some people,” Raimondo said.

Delphi, the largest auto-parts maker, is still cutting jobs. The company said last month that it’s eliminating 6,100 jobs this year to reduce costs. That brings total job cuts to 17,540 since the company instituted a reorganization plan in March 2001.

The company still managed to bump up production about 3% this year by using overtime and improving productivity, said company spokeswoman Claudia Piccinin.

“Although production is modestly up, we’re not convinced that it has stabilized at these levels,” Piccinin said. “We will use overtime as a buffer to continue to meet customer demand and will evaluate our work force needs as the economy rebounds and stabilizes in the future.”

Concern about the sustainability of the recovery isn’t the only reason for the lack of hiring. Sometimes it’s hard to find employees with the right skills.

“A lot of the work our employees do is very precise,” said Gary Johnson, vice president at Ace Clearwater Enterprises Inc., a Torrance-based builder of formed and welded assemblies for the aerospace and power generation industries. “It’s a lot easier to put experienced people on overtime than to start all over with new people.”

Ace Clearwater is benefiting from a surge in defense spending as the country continues the fight against terrorism.

An increase in orders from customers such as Honeywell International Inc. and Lockheed Martin Corp.--mainly spare parts for military equipment--led to a 30% increase in overtime during the last couple of months, Johnson said.

“We are building parts we haven’t built in five years.”

Though the reliance on overtime may be bad news for workers trying to find jobs, it’s proving to be a boon to those getting paid time-and-a-half for the extra work. That’ll help the economy rebound.

Tony Contreras, a welder with Ace Clearwater for 23 years, is putting to good use the extra cash he’s earning by working eight to 20 overtime hours a week. Though saving some, he’s spending much of the extra income on a hobby--improvement projects in the house he’s owned for 16 years. He’s in the process of remodeling the kitchen and bedrooms.

The father of three isn’t concerned about spending the money.

“The way I see it, I think the economy is going to come back and grow,” Contreras said. “I feel like we are going in the right direction.”