Good News: Longer Workweek Could Mean More Jobs Coming

Tim Mullaney
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Employers are reaching their limit stretching the workweek, so they may have to start hiring soon.

The 236,000 jobs the economy added in February lifted markets Friday — and hidden in the details of the jobs report may have been the equivalent of 300,000 more.

That's because the average workweek inched up to 34.5 hours last month, up from 34.4 in January and 33.8 in 2009. It's also within sight of the 34.7 hours per worker per week when the economy peaked in 2006.

In some industries, especially construction and manufacturing, the average workweek is now longer than it was at the economy's last apex, Moody's Analytics economist Marisa Di Natale said.

That means employers are near the end of their ability to get more work done by extending workweeks, said Drew Matus, an economist at investment bank UBS. If demand keeps rising — not a certainty with federal budget cuts that began March 1 — hiring should accelerate through the year, he says.

"If people working hourly get more hours, it's more money in their pocket,'' said Matus, who estimated that the gain in hours, multiplied by all private-sector workers, was the equivalent of 329,000 new jobs. "It leads to more demand, more retail hiring and eventually more hiring generally.''

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Indeed, bosses are running short on both major tools they use to delay hiring, said Richard Moody, chief economist for Regions Bancorp. In addition to near-peak workweeks, employers are seeing productivity growth slow, he said.

The government reported last week that productivity fell at an annual rate of 1.9 percent in the fourth quarter, the sharpest drop since late 2008.

Many economists have expected sequestration to slow job growth by midyear, unless Congress and President Barack Obama reach an agreement to resolve the automatic cuts. Moody's forecasts the economy will add about 135,000 jobs a month at midyear, down from the 205,000 a month average since November.

Hours worked haven't changed much in the last year, said Nigel Gault, chief U.S. economist at IHS Global Insight. It's not clear they will accelerate enough to make employers hire more, especially with sequestration reducing spending by federal workers and contractors, he said.

"The same argument could have been made last winter, but employment growth then fizzled in midyear,'' Gault said. "All will depend on the strength of growth in demand.''

That's where the economy could surprise people. One reason construction added 48,000 jobs is that the average workweek in that industry is now 39 hours, Di Natale said. If housing demand keeps up, that will translate into more hiring, she said, in a pattern that could also play out in other industries.

"The private economy is on much firmer ground than it was a year or two ago,'' Di Natale said. "If the private sector is really heating up, (sequestration) might not be that noticeable.''