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.
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 under water,” 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 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.
“People are not as ostentatious now; they don’t desire having a car they way they used to,” he said.
The auto industry’s weakness is felt throughout the Midwest, including in suburban Harwood Heights, where Winzeler Gear churns out mechanisms that help operate seats, windows, gas pedals and door locks in its highly automated factory.
“We laid off five people in the valley of death, in April 2009,” recalls John Winzeler, president of the firm, which remains at a reduced staffing level of 40 workers, augmented by about six temps.
“Key people are more overloaded today than they were prerecession,” he acknowledged, adding that he hopes to hire two engineering staffers this year.
Ultimately, though, his vision leans toward greater use of automation, which would further reduce the workforce at the facility, which is bathed in rich color and accented with gear-themed artwork commissioned by Winzeler, a design and fashion aficionado.
The vision is “a lights-out plant – nobody in the plant,” he said. “Will we ever get there? I doubt it.”
At Chicago-based Strategic Hotels & Resorts Inc., which owns or manages the assets of 20 high-end hotels, payroll costs were trimmed by 20 percent during the downturn, or the equivalent of nearly 1,500 full-time jobs. “We re-engineered from top to bottom,” said President and Chief Executive Laurence Geller. As a result, even as times improve, the company expects to do without 500 of those positions permanently, and to use the savings to help deleverage its balance sheet and to invest in new enterprises.
The company combined managerial departments, moved more marketing to the Internet and tweaked operations in small ways, such as having night crews set up and place housekeeping carts for daytime staff, eliminating setup time for those day crews.
Truck- and engine-maker Navistar International Corp., which has diversified into recreational and military vehicles and which is moving into new markets overseas, expects production to increase by more than 20 percent this year. But its workforce, now at 16,020, is projected to grow by only 5 percent.
The Warrenville-based company found ways to cut labor costs during the tough times, and those changes are expected to remain, said Daniel Ustian, chairman, president and CEO. “It’ll be a long time until that pressure is off.”
An engine plant in Huntsville, Ala., for instance, moved to a four-day workweek. If production picks up, the company can add a fifth day by paying overtime, rather than hiring right away.
While corporate America’s cautious shift to a hiring mode has trimmed the number of jobs lost in the recession by about 14 percent in the past year, the nation is still short some 7.5 million private-sector jobs. And much of the job growth has been in industries that tend to be lower paying, among them temp services, health care, food service and retail, according to an analysis by the National Employment Law Project, a worker advocacy group. Manufacturing saw gains too, though off a deep trough.
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.
And a broad range of companies with operations or headquarters in the region reports plans to hire, among them Wintrust Financial Corp., PNC Financial Services Group, Southwest Airlines, Kohl’s Department Stores Inc., and Whiting Corp. and Whiting Services Inc., which are sister companies in Monee, Ill., that build and service overhead cranes.
Among the most openly bullish is Edward Wehmer, CEO of Lake Forest-based Wintrust, which was the first local midsize bank to pay back its federal bailout money and which has bought up four failed banks and a mortgage company in a little over a year. It employed the equivalent of 2,635 full-timers last year, up 23 percent from in 2009.
He expects payroll to grow this year too, mostly through deals, but also due to the planned opening of seven facilities.
“We believe the market will still be very ripe for continued expansion,” he said. “The industry will consolidate … and we’ll try to take advantage of that.”
