Weak hiring tempers rebound

Published 6:25 pm Monday, May 3, 2010

WASHINGTON — Factories are churning out more goods. Consumers are spending. Government aid is fueling construction activity. But stagnant pay and weak hiring will likely restrain the economic rebound in coming months.

That cautionary picture emerged from a series of economic reports Monday.

Consumers stepped up their spending in March by the largest amount in five months. Yet the increase was financed out of savings. Incomes rose only slightly.

Unless employers boost pay and ramp up hiring, economists say consumer spending will likely taper off and dampen the recovery.

The construction industry remains a concern, too. Industry spending rose 0.2 percent in March, the first increase in five months, Commerce said. But all the strength came from government activity — much of it related to temporary stimulus money that’s expected to run out soon. By contrast, construction by the private sector fell to the lowest level in a decade.

One sector that’s helping drive the recovery is manufacturing. Factory production in April grew at the fastest pace in nearly six years, according to the Institute for Supply Management, representing purchasing executives. Its manufacturing index rose to 60.4 in April from 59.6 in March — the ninth straight month of growth. A level above 50 indicates expansion.

“We got to see both sides of the economy today. We got a read on the strongest sector, manufacturing, and the weakest, construction,” said Mark Zandi, chief economist at Moody’s Analytics.

Companies are rebuilding their inventories as demand for goods rises. New orders, a gauge of future production, jumped to 65.7 from 61.5 in March, according to the report.

The fastest-growing industries were clothing makers and producers of nonmetallic goods such as glass, mineral wool and ceramic products used in construction. Makers of wood products, the petroleum and coal sector, and plastics and rubber manufacturers also reported strong growth.

Consumer spending has propelled more production in retail goods. On Friday, clothing maker VF Corp., whose brands include Wrangler, The North Face and Vans, said its sales rose 1 percent to $1.75 billion in the first quarter.

Carmakers also benefited from the surge in consumer spending. Analysts say about half of March’s increase went to the industry. Buyer traffic slowed down a little in April, although Ford Motor Co. and Chrysler on Monday both said sales last month were up 25 percent from a year earlier; General Motors Co. said its sales climbed 6.4 percent.

The stock market jumped Monday after the improved economic reports, along with news of a merger between United and Continental Airlines, raised expectations about the recovery.