Labor Day checkup: How healthy is the local job market?

Region is 37,700 jobs shy of pre-recession peak

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Cincinnati’s job market is on the mend this Labor Day weekend, but talent shortages and continued economic uncertainity hamper a full recovery, expert said.

The Cincinnati economy has regained about half of the 76,000 jobs lost during the recession, according to seasonally adjusted data from the St. Louis Federal Reserve. Total nonfarm employment stood at 1,015,900 in July. That’s up 39,000 from February, 2010, when the local job market hit bottom. But it’s still 37,700 short of the region’s pre-recession peak in January, 2008.

“It’s fair to say that this has been a particularly slow recovery for the labor market,” said Janet Harrah, senior director of the Center for Economic Analysis and Development at Northern Kentucky University.

The chart below shows growth of Cincinnati job numbers over time in blue; U.S. numbers are in red, according Federal Reserve Economic Data.

On a local and national basis, unemployment rates are falling. Cincinnati’s jobless rate now stands at 7.1 percent, better than Ohio’s rate of 7.3 percent and the national rate of 7.7 percent.

But some economists worry that too many of the jobs now being created are lower-paying, part-time jobs, lacking in benefits.

Still, Harrah said there are reasons for optimism.

“We’ve had 31 months of year over year job gains,” she said. “All of that job growth has occurred in the private sector.”

On the private sector side, Harrah said the recovery has mostly occurred in the service side of the economy, including health care, which never really lost jobs in the recession, and professional business services, including law and accounting firms.

The chart below shows growth of employment in the professional and business sectors in the Cincinnati area (in blue) compared with across the nation (in red), according to Federal Reserve Economic Data.

The chart below shows growth of employment in the financial sector in the Cincinnati area (in blue) compared with across the nation (in red), according to Federal Reserve Economic Data.

The sectors that haven’t recovered include retail trade, construction and government employment. Cincinnati’s manufacturing economy came out of recession with strong job growth in 2011, but the sector remains well below its pre-recession peak. Productivity improvements and economic uncertainty are the likely culprits.

The chart below shows growth of employment in manufacturing in the Cincinnati area (in blue) compared with across the nation (in red), according to Federal Reserve Economic Data.

“Companies can produce the output needed with fewer people,” Harrah said. “As productivity increases, you need fewer people. The second piece is that companies are very hesitant to bring on new employees in an environment of uncertain regulation and uncertain demand.”

Temp-To-Hire Jobs More Prevalent

Many local companies are coping with that uncertainty by hiring temporary employees, many of whom are offered full-time jobs if they perform well.

Companies are selective about who they bring on,” said Mike Eckelman, president and owner of PrideStaff Cincinnati East, one of three local franchise operators for the national staffing firm. “They don’t want to bring people in and start paying benefits if they can’t do the work and don’t have the proper attitude or aptitude.”

Eckelman’s company has about 150 employees working in light industrial jobs, along with call center and warehouse positions and in the financial sector.

Eckelman said his clients are using temp firms as a flexible staffing tool, ordering up temps instead of posting jobs publicly.

“A lot of companies have made up their minds they’re not going to put an ad out and get 400 applicants and only 2 of whom are qualified,” he said. “Probably 60 percent of the job orders that come through here don’t even hit the streets. They go straight to the agency.”

Eckelman said high-tech manufacturing jobs in the automotive and aerospace indiustries are among the hardest to fill right now, along with health care, accounting and information technology.

Talent Mismatches Could Stall Growth

Within the manufacturing sector, Cincinnati has a shortage of CNC programmers, or people who write the software that guides factory robots, said Jeanne Farmer, regional director for ManpowerGroup, a national staffing firm that publishes a quarterly employment outlook survey for Cincinnati and other markets.

“What we’re seeing is a slow and steady improvement quarter after quarter and that’s kind of formed a launch pad for future progress,” said Farmer.

Manpower will release its outlook for fourth quarter hiring on Sept. 10. In June, it reported 26 percent of local companies were planning to add jobs from July to September, while five percent planned cutbacks.

Farmer said call centers and logistics firms are ramping up for the holiday shopping season, while engineering and IT remain two of the region’s hottest employment sectors. In these fields, she said a “talent mismatch” is developing between jobs available and people qualified to fill them.

“Without a qualified pool of employees ready to take jobs, economic development could be hampered,” she said. “We need to work together to shrink that talent mismatch.”

Demand rising for top talent

Further up the pay scale, executive search firms have noticed a positive trend among local companies who seem more willing to make permanent hires instead of filling in with temporary labor solutions.

“We are busier now than any time since 2008,” said Tom Gilman, owner and CEO of Baldwin Gilman LLC, which placed more than 100 executives in new jobs in 2012. “What we’ve seen in the last couple of months are a number of companies that are telling us, ‘Business is good. We’re growing. We’ve kept the lid on (hiring) too long.”

Gilman is seeing more activity in marketing and financial hiring, compared to recent years. The most talented job candidates are finding they have multiple offers from which to choose.

“We’re working with several companies right now, each with five to seven senior positions to fill,” he said. “I don’t know if that’s a trend. I sure hope it is.”

“We’re working with several companies right now, each with five to seven senior positions to fill,” he said. “I don’t know if that’s a trend. I sure hope it is.”

Copyright 2013 Scripps Media, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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