Service work props up US job market

The US economy is now being powered by educators, healthcare workers, front-desk clerks at hotels, and anyone who can ask, "May I help you?"

Demand for workers in the service sector is hard to sate. Online job postings are full of ads looking for hair stylists, legal case assistants, and billing coordinators. Search firms say 80 percent or more of their work is in the service sector. In fact, the economy has now reached the point that the service sector is creating 100 percent of US job growth.

Last month was yet another example of such economic muscle: The Labor Department reported last Friday a net gain of 132,000 jobs – after a gain of 135,000 jobs in services. The unemployment rate remained at 4.5 percent. So far this year, without the benefit of the 815,000 service jobs added, the economy would have had a net loss of 106,000 jobs.

"The service side is doing all the work.... It's ever more dominant," says Ethan Harris, chief economist at Lehman Brothers in New York. "There has been a steady bleed in manufacturing jobs."

No matter where the jobs are coming from, some economists believe their relatively decent number indicates the economy is showing some resiliency after a laggard performance in the beginning of the year, when the gross domestic product grew at only a 0.7 percent rate. A snapshot of the economy would find a current growth rate of between 3.5 percent and 4 percent, some economists believe.

"We are fairly optimistic the economy is finding its feet," says Ryan Reed, an economist at National City Corp. in Cleveland.

Higher paychecks

One encouraging sign, Mr. Reed says, is that workers are finally getting paid better. On a year-over-year basis, pay is up about 4 percent. "Greater demand for jobs translates into greater pay for workers," he says.

The workforce also appears to be spending more time on the job. Last month, the workweek in the private sector increased by 0.3 percent. Since the economy started the quarter with a decline in hours worked, it indicates a much stronger economy, says Bob Brusca of Fact & Opinion Economics in New York. "The economy put on a big push in June," says Mr. Brusca.

Corporate America also seems to have changed its hiring psychology. When the economy first started to turn around in 2001-02, executives were reluctant to take on more head count. It became known as the "jobless recovery."

Now, executives seem to be interested in filling jobs quickly. "They are worried. They have been burned too many times with not enough people or the right people, so they just keep hiring," says John Challenger of Challenger, Gray & Christmas, an outplacement firm in Chicago. He estimates that more than 80 percent of his company's placements are for service-sector jobs.

Some new jobs are in surprising places. United Airlines, which has pared its workforce over the past six years, announced last month it would hire 100 new pilots and would recall other pilots who were laid off.

The airline industry is stretched so thin that staffing issues are hurting its ability to fly on time. Last Friday, for example, ExpressJet, which flies routes for Continental Airlines, was unable to get a flight attendant from Burlington, Vt., to Newark, N.J., for five hours. As a result, Flight 2764, scheduled to leave at 3:55 p.m., did not get off the ground until 10 p.m. Reserve flight attendants had already been sent on another flight, a spokeswoman for the airline says.

Efforts to keep workers happy

While many service-sector jobs are low paying, some are finding that employers are looking at them differently in an effort to keep workers happy. That's what's happened to Robert Recio, who was hired two months ago to work at the front desk at the Sheraton New York after spending two months as a security guard at Yankee Stadium.

The work at the hotel, says Mr. Recio, a marketing major at Monroe College, is much better: He gets longer breaks, the pay and benefits are greater, and the hours are flexible. And they've switched Recio's shift twice at his request. "They work around my hours. They're really good with school and stuff."

Switching jobs within the industry also appears to be easier for picky job candidates. That's been the case for Alex Bertrand, who left Louisville, Ky., after three years of teaching middle school. Last October, he began applying for teaching jobs in New York City. He knew he'd find a position, but he didn't want to end up in a school with a disorganized administration or get stuck teaching "angry and ornery" kids. So he applied to a handful of area schools, and this past April he was hired by Democracy Prep, a year-old Harlem-based charter school.

Getting a teaching job in New York didn't seem like too much of a challenge, says Mr. Bertrand, who has a degree in engineering. He waited with a crowd at the Department of Education headquarters to get fingerprinted, which made it seem like "everyone and their mother is trying to become a teacher."

That could be true. Last month, education and health services saw a nationwide rise of 59,000 jobs, the most of any sector.