- The Washington Times - Monday, April 9, 2001

The almost daily announcements of mass layoffs at big corporations is just distant thunder to Doug Wright, field supervisor at Petro Services, a Beltsville, Md., company that builds gas stations and installs gasoline storage tanks.

He's having trouble finding qualified workers and has had to increase wages and offer new benefits to attract the laborers he needs. Even so, some skilled workers leave for better-paying jobs at other construction companies and Petro has had to turn down projects for lack of manpower.

"Help is scarce right now. This year is worse than ever," he said. "We're at the point right now we're so swamped we wonder from week to week how we will do the job."

Economists say the boom and tight labor market in old-line businesses such as Mr. Wright's is an important reason that the economy hasn't fallen into recession, despite the biggest slump in manufacturing and technology in a decade.

Stocks have been dropping for a year, manufacturing is in a deep funk and so-called "new economy" firms are disappearing by the day. But old-economy stalwarts such as Petro Services continue to churn out new jobs and keep the economy growing, albeit tepidly.

The still-strong sectors of the economy are basic industries, many of which serve fundamental needs and will survive any economic downturn: small business, housing, energy, education, health care, and construction of everything from office buildings and schools to bridges and gas stations.

While the stock market plummeted, spending on construction projects of all kinds in February hit a record high of $834 billion a year, led by housing and roads, according to the Commerce Department. Sales of new and existing homes remain near record-high levels of more than 6 million a year.

With business booming, shortages of skilled labor continue to be a major concern of builders and small businesses, cited by more than 80 percent of general contractors in a recent survey by the Associated General Contractors of America.

The steady flow of jobs and incomes from basic industries has helped keep the unemployment rate at the historically low level of 4.3 percent, and that in turn has underpinned consumer confidence and spending. As a result, more than 1.2 million new jobs were created in the past year, according to the Labor Department.

Construction companies and trade contractors added 181,000 of those jobs, partly offsetting a 439,000-job loss at automakers and other manufacturing companies. The market for engineers and managers also boomed with 135,000 new jobs.

Retailers, which employ about one-sixth of the American work force, took on 275,000 more workers in the past year, particularly at food stores, restaurants and small specialty stores.

While dot-com layoffs captured the headlines after the bubble in technology stocks burst last spring, technology hiring at old-line firms remained strong, quickly absorbing most displaced workers. The result: a net increase of 106,500 new jobs in computers and data processing alone.

The Information Technology Association of America projects another 900,000 technology jobs will open this year, despite a slowdown in technology hiring.

"People in Silicon Valley are finding jobs in hours, not days, even after layoffs," said Diane Swonk, economist with Bank One, noting that the recent proliferation of layoffs has mostly served to loosen up what had been drum-tight labor markets.

"Small businesses have been complaining for years that the labor shortage is so acute they had to stop hiring. Now, they've got someone to hire," she said.

Recent hype about thousands of layoffs at dot-coms as well as at blue-chip corporations such as Motorola, Cisco, Dell, Dupont, Montgomery Ward and Sears has distorted the picture, she said.

Corporations are required by law to announce mass layoffs, but they are not required to announce their steady stream of hires.

While the volume of help-wanted ads is down 20 percent from a year ago, reflecting the economic slowdown and layoffs according to the Conference Board, businesses still are creating on balance about 100,000 new jobs a month. The job-creation rate is down by half from a year ago.

Housing and construction have drawn their strength from the still-growing job market, and also from a drop in interest rates engineered by the Federal Reserve this year, Ms. Swonk said.

The continued strength of the building industries is a sure sign that the economy has not fallen into recession, she said.

"They tend to be the sectors that are first over the hill when the economy's going down," she said, adding that their resilience has "stunned everybody."

Housing and construction contributed to growth in the first quarter of the year, offsetting a drag on growth from a glut of inventories of manufactured goods from cars to computers that have to be sold off before manufacturers can ramp up production again, economists say.

As a result, the economy probably eked out a growth rate of between 1 percent and 2 percent in the first quarter, they say.

While construction has been a sturdy spot in the economy, it has slowed some along with other sectors, economists say. But spending on health care and education actually accelerated as the rest of the economy languished.

Health care and education hiring is downright robust, with 211,500 openings created for doctors, nurses and other health workers in the past year. Hiring of public and private teachers and principals totaled 174,000, while households went begging for another 57,500 child care workers.

Lynn Reaser, chief economist with Banc of America Capital Management, said she asked for a show of hands at a recent health care conference from people who thought the economy was in a recession. "Not a single hand was raised," she said.

The boom in health care and education is being driven, she said, by an increase in government spending in both areas and demographic trends the aging and increasing illness of the baby boom generation and the rise of their "baby boomlet" children within the school system.

The recent decline in state budget surpluses may start to cut into spending on new teachers, she said, but it should not pinch the budgets for public construction of schools and highways too much because those projects usually are financed either with bonds or dedicated taxes such as the gas tax.

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