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Good News for Jobs: Rising Demand

Since 2007, much on my street has sat empty and forlorn. The old clapboard house that stood on the site for decades was torn down at the top of the housing market. For four years, the developer waited for the market to recover before putting shovels into the ground. But construction on a large speculative house started late last year. And every day, trucks, vans and pick-ups trundle down to unload supplies and people: roofers and sheetrockers, plumbers, electricians, a team of landscapers planting shrubs and grass, a few guys pouring cement for a patio, a crew laying down Belgian block and paving the driveway, the real estate brokers.

Anyone who has ever waited for a house to be completed, or who has hired a contractor to do a home renovation project, knows that it's a labor-intensive process. We may rely on technology to a greater degree than ever before in manufacturing or media. But when it comes to installing a kitchen countertop or ripping out tile from a bathroom, it still requires lots of human labor. And when somebody places a new order, people are put to work.

Next week, the Bureau of Labor Statistics will report jobs growth for March. If the economy is to sustain and even increase the pace of recent months, we'll have to see growth in sectors where higher demand translates into higher employment. There are signs that is happening — beyond the guys who clog up my street in the morning.

New housing starts in January and February 2012 were 25 percent higher than they were in January and February 2011. The growth has been more dramatic in multi-family units than in single-family homes. But that still means lots more work for the many trades and professions involved in home construction. In addition to new construction, the pace of work on existing homes is up significantly. Diana Olick at CNBC reported this week that: "Residential remodeling, as measured by building permits in January, were up 13 percent from December and 11 percent from a year ago, according to BuildFax," with particular strength in the Midwest and the West. The growth, driven by pent-up demand and the need for owners to fix up or maintain houses acquired via foreclosure, is one reason the stocks of Home Depot and Lowe's have been rallying so strongly in the past six months.

Here's some more reason for optimism on the jobs front. Higher demand can be seen in other sectors that are similarly immune to productivity leaps, such as sit-down restaurants. Floyd Norris in The New York Times reported last week that "over the 12 months through January, sales at what the government calls full-service restaurants were 8.7 percent higher than in the previous 12 months. That was the fastest pace of growth since the late 1990s, when the economy was booming." What's more, Norris noted, sales are growing much more rapidly at sit-down restaurants than at restaurants that have limited service. The upshot: More customers are coming in to restaurants, sitting down and ordering off the menu today than a year ago. And in a labor-intensive business like restaurants, more demand means more work for waiters, chefs, busboys and suppliers. According to the Bureau of Labor Statistics, food services and drinking establishments added 40,000 positions in February and have added 305,000 positions over the past year.

By the same token, personal care services also tend to defy automation. And there are signs of rising demand in this area, too. Last week, Hadley Malcolm reported in USA Today, citing work from the data firm Sageworks, that "beauty salon sales grew 5.4% in the last two years, vs. a 2.3% sales increase in 2009."

This anecdotal data help fill in some of the dots of the larger narrative. The economy is now in a situation where job openings are relatively high, unemployment claims are relatively low and consumer demand continues to rise. With activity growing in sectors that are generally immune to automation, mechanization and offshoring, this set of conditions bodes well for employment growth. Service sector jobs may not always be the best paying or offer the best conditions. But with millions of people out of work and underemployed, signs of employment growth should be welcomed wherever they pop up.

Daniel Gross is economics editor at Yahoo! Finance.

Follow him on Twitter @grossdm; email him at grossdaniel11@yahoo.com

His next book, Better, Stronger, Faster: The Myth of American Decline and the Rise of a New Economy¸ will be published in May and is available for pre-order.