Good news from the office of Freddie Mac’s chief economist, Frank Nothaft, indicates a solid gain toward economic recovery. Freddie Mac economists listed payroll employment up by 248,000 during May, which added to the creation of 947,000 jobs from March through May. Construction employment was up 37,000 in May, and manufacturing employment was up by 32,000, accounting for the most jobs in that industry since August 1998.
Closer to home, the Vectra Bank May small-business index, prepared by economist Jeff Thredgold, showed that Colorado employment increased by 12, 100 jobs during the past 12 months, the first “year-over-year increase since mid-2001.” The nation’s unemployment rate was 5.6 percent in May, compared to a Colorado unemployment rate of 5.1 percent and a Colorado Springs unemployment rate of 5.4 percent.
As the job market improves, mortgage rates climb.
Fixed-rate mortgage rates are about 1 percent above the 2004 rates, but the current 6.3 percent rate on a 30-year product remains low and attractive, according to the report. Nothaft and his staff predict interest rates will average 6.3 percent in 2004 and 6.7 in 2005; home construction remains strong with an estimated 1.86 housing starts in 2004. They predict that 7.25 million homes will sell in 2004, breaking all-time home-sales records. However, Nothaft and his staff say higher mortgage rates will dampen sales in 2005 to about 6.67 million units sold.
Regardless of overall dampened housing sales forecasted for 2005, a bright outlook involves 2004 local tax sales records.
The city of Colorado Springs’ June sales and tax collections increased from last year by 8.28 percent. Sales taxes increased by 6.66 percent, and use taxes increased by 35.13 percent, compared to June 2003. Clothing stores reported the highest percentage increase – 16.99 percent – from last year’s figures. Building materials’ sales tax gains were up from last year by 12.16 percent. Industries that reported decreases in sales taxes were auto repairs and auto leases and hotels.
While tax revenues, mortgage rates, housing construction starts and unemployment statistics are strong economic assessment tools, the staffing industry is one of the sharpest barometers of economic recessions and recoveries.
According to a national survey conducted by the American Staffing Association, U.S. staffing firms employed an average of 2.3 million temporary and contract workers per day from January through March. The 2.3 million is up by almost 200,000 from the same period last year. An article in Staffing Success magazine – “The Bright Spot,” by Steven P. Bercham – revealed that staffing firms enjoyed an upswing in 2003, employing an average that year of 2.27 million temporary and contract workers, which was up 10.2 percent from 2002. Staffing firms hired 10.7 million employees in 2003, an increase of 1 million employees hired in 2002.
Staffing industry revenues for 2003 totaled $62.4 billion, a 1 percent increase from 2002. Bercham stated in the article that the staffing industry is expected to “create more new jobs than any other industry.” He also reported that the staffing industry is projected to add almost 1.8 million jobs during the 2002-to-2012 period, a 54 percent increase over the previous 10 years. Bercham said the increase means a 4.4 percent annual growth rate, “making staffing the fifth fastest-growing industry in America.”
According to Bercham’s article, “Ninety to 95 percent (of businesses) turn to staffing companies for temporary help. & From Wall Street to Main Street to Pennsylvania Avenue, the staffing industry is widely regarded as a leading indicator for the labor market.”
Colorado is one of the last states to come out of the recession, according to the Vectra Bank small-business index, and the staffing industry is behind the eight-ball in comparison to the national staffing upsurge. However, there is more good news coming from the office of Cari Shaffer, Add Staff founder and president. “It hasn’t been a fast uphill climb, but it’s been steady,” Shaffer said. “Last week we broke a record in production, and we hadn’t seen that crossover since December 2001.”
Add Staff’s number of placements has increased along with the percentages charged to employers, which are based on the new employee’s first-year salary. Shaffer said other indicators include the receivables (not as many collection phone calls) and the employers’ willingness to pay more for permanent and temporary help. Jobs also are opening up because Shaffer said people are changing jobs again and “taking calculated risks.”
Shaffer said the technical industry is in good shape, too. Even though times were still shaky, Shaffer’s instincts led her to hire a third technical and professional staffing person in July 2003. “I knew I had done the right thing when the week of Thanksgiving started a trend upwards,” Shaffer said. “December is usually slow, but during this past year, every week, from Thanksgiving on, was better than the same week last year.”
Four of Add Staff’s employees attended a Colorado Staffing Association meeting in early July, and Shaffer said the Denver firms are experiencing the same growth. “I am excited that so many companies are feeling well enough to spend money for staffing,” Shaffer said.
Shaffer said at the six-month level, Add Staff is up about 14 percent from last year.
And that’s the good news.
The bad news from the office of Freddie Mac’s Frank Nothaft reflected an accelerated consumer-price index, up 4.4 percent in May. The culprit was the rise in crude oil prices, which, in turn, caused gasoline prices to soar to an all-time high of $2.10 in May. The inflated energy costs are certain to offset economic growth, according to the Freddie Mac report; however, the economists noted, “Gasoline takes a much smaller bite out of the consumer’s pocketbook than a quarter century ago, mitigating the effects of the price rise on consumer spending.”
Freddie Mac, Vectra Bank, the American Staffing Association, locally grown Add Staff and Springs sales tax records suggest the good news outweighs the bad.
Shaffer agreed the economic indicators are positive, as she recalled her 20 years in business riding the recession and recovery wave. She judiciously concluded, “I am feeling very good, but as a businessperson I will remain cautiously optimistic.”