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U.S. Economy Gains Steam as 200,000 Jobs Are Added

January 6, 2012 by Leave a Comment

The United States added 200,000 new jobs last month, the Labor Department said Friday, a robust number that came on the heels of a flurry of heartening economic news. Consumer confidence lifted, factories stepped up production and small businesses showed signs of life. The nation’s unemployment rate fell to 8.5 percent, its lowest level in nearly two years.

It was the sixth consecutive month that the economy showed a net gain of more than 100,000 jobs — not enough to restore employment to pre-recession levels but enough, perhaps, to cheer President Obama as he enters the election year.

The sustained run of positives had economists like Markus Schomer, of PineBridge Investments, feeling much more optimistic than they did back in August, after a spring and summer of lost economic ground and a demoralizing debate over the debt ceiling.

At that time, Mr. Schomer thought, as many did, that government dysfunction was paralyzing the economy. Now, he is ratcheting up his growth forecast for 2012.

“The improving trend in the U.S. labor markets is not just a temporary blip, but seems to be something quite sustainable,” he said, adding that the improvement had come despite continued Washington gridlock.

Among the pieces of good news in Friday’s report: The drop in the jobless rate came largely from real gains, not from discouraged workers giving up the job hunt. The new jobs were spread broadly across industries, with transportation and warehousing, retail, manufacturing and restaurants all adding jobs.

In addition, average wages ticked up by 4 cents an hour, though over the year wages have not kept pace with inflation. And government downsizing, which has been a drag on the jobs numbers, slowed in December, with only 12,000 public jobs lost. The private sector added 212,000 jobs.

In another positive sign, the unemployment rate seemed to be dropping at a faster rate than the number of new jobs would imply, perhaps because new businesses and the newly self-employed are less likely to be captured by the Labor Department’s survey of businesses, from which the job numbers are drawn, than by its survey of households, from which the unemployment rate is calculated.

Economists continued to warn of potential dangers ahead, including disaster in the euro zone, increased tensions with Iran leading to higher gas prices, and the expiration of the Bush tax cuts. Congress may yet decline to continue extensions of the payroll tax break and unemployment benefits that have given spending a boost. Money, in the form of loans, is still hard to come by, and home prices have continued to fall.

There is also a sense of déjà vu, since hopes were similarly buoyed by good news last year at this time. Those hopes, Mr. Schomer pointed out, were soon dashed by the earthquake in Japan. “I’m a little bit concerned that Iran could be this year’s Japan,” he said.

Still, context is everything. The same modest upward trends that a few months ago were dismissed as far too anemic to do much are now being greeted with tentative praise. “People were very much thinking that the sky was falling,” said Tom Porcelli, an economist at RBC Capital Markets. “It’s no small victory that we’re up here, even with all these headwinds.”

Economists ventured to suggest that the good news and consumer confidence might feed off each other, leading to further increases in spending that, they hope, will be followed by the wage increases necessary to sustain that spending.

Bullish types were quick to trumpet the American economy’s resilience. “This is the real thing,” said Ian Shepherdson of High Frequency Economics. “This is finally the economy throwing off the shackles of the credit crunch.”

The Labor Department numbers were foreshadowed Thursday in a report by ADP, the payroll processing company, that showed a whopping gain of 325,000 private-sector jobs in December. ADP’s reports do not always correlate with the Labor Department’s findings, but they can provide additional insight. Diane Swonk, an economist with Mesirow Financial, said most of the new jobs in the ADP report were at small businesses and that generally only newer small businesses use a payroll company.

“It’s one of those things where you look at that and say, ‘That would be really cool if that continues,’ ” Ms. Swonk said. “It’s not just small business — it’s new business formation.”

Other factors, like seasonal adjustment, could be making the economy look better than it is. Seasonal adjustments are calculated based on the patterns of recent years. Because the recession began in December 2007, a drop-off at that time of year is now part of the pattern, and anything else looks better by comparison.

The seasonal adjustments may not wholly account for trends like online shopping, which boosted hiring of couriers and messengers by 42,000, a gain that economists expect to be reversed now that the holiday season has ended.

But there is more to the good news than statistical flukes, said Ellen Zentner, an economist with Nomura, pointing to the big jump in consumer confidence in December. “People do not feel more upbeat for no reason,” she said.

This article has been revised to reflect the following correction:

Correction: January 6, 2012

Because of an editing error, an earlier version of this article, and an e-mail alert, misstated the unemployment figure for November. Although it was initially given a month ago as 8.6 percent, it was revised Friday to 8.7 percent.

Article source: http://feeds.nytimes.com/click.phdo?i=50f4d5ca0c79b305b8295c55778a5f01

Filed Under: Business News Tagged With: , ,

You’re the Boss Blog: A Small-Business Owner Copes With a New Problem: A Rush of Orders

October 25, 2011 by Leave a Comment

Staying Alive

The struggles of a business trying to survive.

The sudden rush of buyers I described in my last post has continued — we sold another $80,000 in the last week and sales for October total $302,129. Year to date we’re at $1,798,892. My goal at the beginning of the year was to average $150,000 a month. Mission accomplished, with two months to spare!

In the last two weeks of September and the first two weeks of October we sold $411,856 worth of tables. That’s two and a half months’ worth in four weeks. Our backlog of orders has ballooned from two weeks to 10 weeks. My problem of not enough work has suddenly morphed into a question of how to get the work done on time.

For most of this year, until the end of August, our backlog was swinging between three and five weeks. The backlog was trending downward, as the people I hired in the spring, and the machines I bought a little later, brought our monthly production up. In the first quarter, we built $418,742 worth of tables. Second quarter: $502,064. Third quarter: $508,391. Sales had also trended up a little, so our greater capacity was appropriate for that higher level — or it was until sales stopped.

The sudden drought prompted me to consider cutting capacity. The subsequent deluge has me wondering whether the increase in sales represents a permanent rise in incoming orders, or whether it’s a blip. If sales stay high, I have the opportunity to increase our production capacity, run more volume through the shop, and make more money.

Most of the new jobs we have booked have been the kind of stuff we ordinarily do: a piece or two per client, with a total value of $10,000 to $30,000. Some have been smaller, and we have had a few larger ones as well. But this year we sold two jobs of extraordinary size to the same client: the first, which came in at the end of July, was for $82,575. The second, which landed on Oct. 7, was more than twice that size: $169,369. That’s 14 percent of our sales to one customer. And that second job also accounts for half of my current backlog. Given that I don’t expect to be taking orders like that very often, I’m reluctant to consider them in planning future production capacity.

Running a larger backlog wouldn’t appear to be much of a problem. As long as we make our promised delivery dates, it just means that we know we’ll be busy for 10 weeks instead of for four or five, which is our usual situation. There is one negative effect of a bigger backlog: we cannot take orders from clients who need things in a hurry. Already this week I’ve had to turn away three prospective clients, whose jobs would have totaled more than $35,000. They all wanted delivery in four to five weeks, which I  could not promise. This problem tends to correct itself: we get busy, we turn down jobs, we sell less, our backlog shrinks back to where it needs to be, and the quick-turn jobs go into the books again. Of course the jobs we turned down, and the money that went with them, are gone forever.

Last week, at our weekly meeting, we reviewed our build schedule for the next two months. The critical date is Dec. 1, when we will need to deliver the $169,000 job. It absolutely cannot be late — we got the job because we promised to deliver on time. The client wasn’t fussy about an extra dollar or two here or there as long as I hit that deadline. And just to make sure I was paying attention, they stipulated that the job would be done on a net 30 basis — no money for me until I deliver. These are not terms I would have chosen, but we just completed a successful job for them and we were paid 26 days early.

At the weekly meeting, I pointed out that in order to complete the job on time, we will have to do a lot of work in October. We will have to build $206,921 worth of tables this month, I said, when we have been averaging $169,463. But if we can process all of this work, we will be in a good cash position by the end of the year — and if I am feeling prosperous and happy, bonuses are likely to follow. I also authorized unlimited overtime.

You might think that this would be a good moment to hire more people. Unfortunately, the skilled workers we need to increase production are not readily available. Our work is so specialized that it takes months to convert ordinary woodworkers into conference-table experts. So temps can’t help me. And outsourcing doesn’t work for me, either. Remember, our specialty is delivering superior work in the shortest time. When we outsource, we give up control of quality and schedule.

If only I could temporarily hire a highly trained cabinetmaker who already knows our production methods — and then get rid of him as soon as we finish our big project! Actually, there is such a person — and he was sitting next to me in my office: Nathan, my sales engineer. I had promoted him from the bench to the office in 2010, but I recently turned him right back around. We won’t be able to take new orders for a couple of weeks anyway, so I don’t need him to write proposals. He has been back at his old bench for a week now and has already completed two projects. He’ll be out there for at least the rest of October, and perhaps some of November as well. That means I am temporarily demoted as well: I’m answering phone calls and writing proposals again.

So far, we are running ahead of schedule on the October build. I don’t know if it’s my fantastic leadership skills, the chance for a bonus, the extra worker, a run of good luck, or all of the above. But it looks like we’ll head into November in good shape.

I’m still kicking around the idea of hiring another builder on a permanent basis and even interviewed a candidate who would be a good fit. But I’m not at all certain the high level of sales will continue, particularly given that the beginning of December is usually dead, dead, dead. And that’s right when our backlog will suddenly shrink to four weeks again. Any other time of the year I would take a few quick-turn jobs to keep things busy, but I don’t expect our phones to be ringing then.

So I’m afraid I won’t be doing any more to bring down the unemployment rate this year.

Paul Downs founded Paul Downs Cabinetmakers in 1986. It is based outside of Philadelphia.

Article source: http://feeds.nytimes.com/click.phdo?i=551efada5aa332584d5089c960b41280

Filed Under: Small Business Tagged With: , ,

You’re the Boss: The Government’s Calling About a Table. Should I Take the Call?

August 10, 2011 by Leave a Comment

Staying Alive

The struggles of a business trying to survive.

The end of summer brings a surge in calls from government clients, mostly from the military, looking to spend remaining dollars in their budgets before the fiscal year ends on Oct. 1. This year is no exception. The surge has started and is most likely to peak at the end of August. Just last week we got calls from the State Department, the Army and the Marines. The person on the phone is generally a low-level officer, responding to a request from a superior for pricing on a large and fancy table. Our bid will be presented to the upper ranks as one of a number of ways to spend their remaining money. Consequently, we sell a much lower percentage of these inquiries than those from private clients. But August is usually a slower month for private business, so we take the time to write proposals anyway.

This year, however, the expected slowdown in private business has not happened, even though the number of visitors to our Web site has not changed. I believe that this is because the site is yielding more calls per viewer. Of all the metrics I track with Google Analytics, we’ve seen the biggest change in the bounce rate (number of people who leave after viewing one page) and the time spent on the site. Our bounce rate had hovered between 50 and 60 percent for the last two years, but now it’s down between 40 and 50 percent. Time on site went from three minutes to five minutes. Potential clients are clearly finding it easier to spot the things they are looking for, and we are seeing it in more calls per week. The revamped site has only been active since the last week of June, so I’m not sure whether this is a blip or a permanent change. But the result has been an overload on my sales department (which consists of three of us). We’re deep in the weeds right now. It’s taking us two to three days to get to new proposal requests, when normally we get them done in a day or less.

It’s tempting to ignore the government callers, or at least to cherry-pick the most promising. On the other hand, some of these jobs do come through. In the fall of 2008, an order from the Air Force kept the business from failing. Last year, we got a large order from NASA, and a couple more from the Air Force. Our direct sales to the government were $146,355, out of a total of $1,549,488. That’s a month’s work for the whole shop. If I add in the orders from defense contractors ($36,423), who are undoubtedly also spending government money, we’re looking at 12 percent of our sales.

All of the recent talk of debt ceilings and default has added another note of uncertainty. Government work is done on a strict net 30 basis: do the work and deliver it first, get paid 30 days later. There are some arcane billing procedures to deal with, but my experience has been that as long as I do a good job and jump through all of the hoops, I will get paid. But lately there’s been talk of delaying payments to the military and defense contractors, which could leave me hanging. We finished a job for NASA in the winter, and delivered a month before the near-shutdown in March. I was told by the contracting officer that the funds were already allocated, but that if the government shut down, there would be no one to disburse them to me. Fortunately, we got the payment as promised.

Some people talk about government spending as if it’s fundamentally different from private economic activity. I don’t see it that way: for me, a dollar is a dollar no matter where it comes from. If I get money from, say, an H.M.O. in Ohio, I pass it on to my suppliers, my employees, my landlord. I keep a little bit, and some goes back to the government in payroll taxes. If I get some dough from the Air Force, the same thing happens. Maybe the H.M.O. borrowed the money used to buy my tables, and maybe the Air Force did, too. So what? They decided to buy something from me, and I’m glad they did. So are my employees, suppliers, and landlord. The government dollar isn’t destroyed by being spent — it just goes back into the private economy.

I think I’ll do this: speak to every caller the same, whether government or private. We’ll make a judgment call once we get off the phone as to how likely we are to get the job, factoring in the size of the job as well. Private callers with large potential orders who need quick delivery will get first priority — they are the easiest jobs to sell. We have made more sales to the Air Force than to any other branch, so it takes priority among military clients. Calls from other branches of government will be evaluated on a case-by-case basis. Calls from California government agencies will, as always, be discarded immediately.

If you do business with government agencies, do their financial difficulties affect how you work with them?

Paul Downs founded Paul Downs Cabinetmakers in 1986. It is based outside of Philadelphia.

Article source: http://feeds.nytimes.com/click.phdo?i=bef61645cadfcb04911d187580bc274c

Filed Under: Small Business Tagged With: , ,

Economix: 5 Questions About Friday’s Jobs Report

May 6, 2011 by Leave a Comment

A job fair this week in Phoenix for positions at a grocery chain.Ross D. Franklin/Associated PressA job fair this week in Phoenix for positions at a grocery chain.

Below, we pose five questions to ask about Friday’s jobs report, much as we did a month ago. The big picture is that job growth has been picking up in recent months — but the job market is still a long way from being healthy, and the last month or so has offered new reason for concern.

The Labor Department will release the report at 8:30 a.m. Eastern time.

Our five questions:

1. Has the recent economic slowdown led to a slowdown in job growth?

The first quarter of this year had the strongest job growth since before the recession began, in late 2007. But that job growth came on the heels of accelerating economic growth in late 2010. The economy has slowed markedly in early 2011.

Ben S. Bernanke, the Federal Reserve chairman, and many private forecasters say they think the economic slowdown was mostly a blip. Do employers agree? Or have they cut back on hiring and potentially increased layoffs?

As a point of reference, the most recent Labor Department numbers show that economy added 216,000 jobs in March and an average of 159,000 over the past three months.

2. Has the crisis in Japan affected employment in this country?

This will be the first jobs report that will include the effects of the Japanese tsunami (because the survey period is the week that includes the 12th day of the previous month, and the tsunami occurred on March 11). One place to look for effects: the automobile industry, which has been hurt by a shortage of parts from Japanese factories.

Employment in the manufacturing subcategory known as Motor Vehicles and Parts has been growing recently, by an average of almost 4,000 jobs a month over the last six months, to 697,000. What happened in April?

3. Are the cutbacks by local and state governments becoming more severe — or perhaps less so?

They are major employers, with 19.3 million workers. But facing deficits, they have been laying off workers and hampering the recovery. Over the last year, they have cut an average of 24,000 workers a month (and at a fairly steadily pace over the year).

4. What does the length of the work week say about business executives’ state of mind?

Companies often increase existing workers’ hours shortly before they start hiring large numbers of new workers. That hasn’t happened much this year. The average work week in the private sector was 34.3 hours in March, up from 34.2 hours late last year.

An increase would be a sign that employers — like stock-market investors — do not seem scared by the recent slowdown in economic growth. A lengthening work week would also help increase workers’ paychecks at a time when hourly wage growth has been weak.

5. Do the statistical details in the report offer reason for optimism?

The Labor Department won’t be releasing only numbers for April on Friday. It will also be revising its estimates of job growth in February and March. Current estimates show employment gains of 194,000 for February and 216,000 for March. An increase in those numbers would suggest that the government’s surveys of employers are having a hard time keeping pace with new hiring — a common occurrence during a recovery.

Likewise, the government’s survey of households will also be worth watching. In recoveries, it often shows bigger job gains than the survey of employers. And it usually ends up being more accurate, partly because the employer survey misses the jobs created by start-up firms. From January to March, the household survey showed an average employment gain of 219,000 jobs, compared with 159,000 for the employer survey.

Article source: http://feeds.nytimes.com/click.phdo?i=d285df7740091bbbee42ec61d04d60fc

Filed Under: Business News Tagged With: , ,