More Job Hiring Expected as Gloom Starts to Lift

By LUCA DI LEO

U.S. companies optimistic about the economy plan to hire more workers in coming months, a quarterly survey released Monday found, another signal that the jobs market is turning up.

The fourth-quarter poll of 84 companies by the National Association for Business Economics found 42% expected to increase jobs in the next six months. That is up from 29% in the first quarter of 2010. Only 7% of companies in the latest survey predict they will shed jobs in the coming six months, down from 23% at the start of last year.

"It looks like the opening melody of a true recovery in the labor market," said Shawn DuBravac, economist at the Consumer Electronics Association, a trade group, and chairman of the NABE committee that conducts the survey.

The U.S. economy has been growing for a year and a half but companies have been slow to ramp up hiring. That may change soon as the economy is widely expected to pick up steam. To meet higher demand, many businesses have relied mainly on existing workers to increase output. But there is a limit to how much they can boost productivity.

"The economy is potentially at a turning point in job creation," said Randall Kroszner, a professor at the University of Chicago Booth School of Business and a former Fed governor.

NABE surveyed companies in various industries including manufacturing and finance. The poll, conducted from Dec. 17 to Jan. 5, found the gap between companies planning to hire workers over the next six months and those that expect to shed jobs widened to the highest level since 1998.

To be sure, the 2007-2009 recession was so deep that a lot more jobs need to be created to make a dent in the high unemployment rate, now at 9.4%. The U.S. government's jobs report for December shows hiring remains weak.

But the recent drop in weekly jobless claims points to a stronger labor market, and the tax-cut package approved at the end of 2010 is seen as likely to help the economy this year.

More than half the companies surveyed—especially those in manufacturing, mining and agriculture–expect to see a favorable impact on sales from the tax-cut deal. Companies generally have raised their expectations for growth this year.

All of the survey's four major industry sectors—goods-producing; services; finance, insurance and real estate; and transportation, utilities, information and communications—registered stronger demand in the final three months of 2010.

Economists in the private sector and government are increasingly optimistic about the pace of the recovery.

Strong U.S. consumer spending during the holiday season has raised expectations for growth, despite a persistently poor outlook for housing.

The economy expanded by a 2.6% annual rate in the third quarter and is expected to have grown by more than 3.0% in the final three months of 2010, as well as in each quarter this year, according to a Wall Street Journal survey of economists published this month. When Federal Reserve officials meet this week, they are expected to raise their growth forecasts for 2011 slightly.