Shorter Workweek Puzzles Analysts

WASHINGTON – Amid the hoopla Friday over the boom in U.S. hiring in March and April, economists puzzled over a dip in the length of the workweek, saying this seemed to contradict the buoyant jobs outlook.

"We really don't have a good explanation for it," Bureau of Labor Statistics (search) commissioner Kathleen Utgoff told Reuters, adding that government statisticians had sifted through April's employment report in an effort to explain the anomaly.

Normally, employers boost the hours put in by existing workers before they hire -- hoping that extra overtime or a longer workweek will stave off the expense of new hiring until the economy is clearly strong enough to support it.

Instead, average weekly hours worked in manufacturing dropped to 40.6 in April from 40.9 in March and 41.0 in February. In the same two months, factory overtime fell to 4.5 hours a week from 4.6 hours.

In the private sector as a whole, the workweek declined to 33.7 hours in March and April, down slightly from 33.8 hours in February and nearly an hour shorter than during the boom years in the late 1990s.

Analysts had expected the workweek to lengthen to 33.8 hours in April in a sign more hiring lies ahead.

"The relatively short workweek does raise a caution flag about the sustainability of the recent surge in new jobs," wrote Steven Wood, economist of Insight Economics (search).

Wood, along with analysts at Deutsche Bank (search) and High Frequency Economics (search), called attention to the workweek issue as the only real soft spot in an otherwise strong report.

But Wells Fargo chief economist Sung Won Sohn offered an optimistic explanation.

Instead of being a negative, Sohn said, the short workweek and drop in manufacturing overtime may show employers are so confident in the economy's strength they are skipping the step of increasing overtime and working hours and going straight to new hiring to meet rising demand.

"Businesses are saying they feel more confident about demand in the future, therefore they are willing to hire more permanent full-time folks, as opposed to part-timers who are working overtime," Sohn said.

Dan Barnett, chief operating officer of TEC International, which regularly surveys 1,000 chief executives at small- and medium-sized businesses, agreed.

"What they're clearly saying is that they're absolutely feeling the recovery, and they're expecting their sales and profitability will continue to grow throughout 2004," Barnett said, noting that 62 percent of executives in his last survey plan to boost total employment this year.

"They are just hiring as they have the need -- which is keeping a steady, full workweek, but not an unusual need for overtime," Barnett said.

Still, BLS commissioner Utgoff said her statisticians were not able to find a link between increased hiring and a shorter workweek within individual industries.

"If the hours had gone down in industries where there were significant increases in employment, you might have made that conclusion, but that's not what happened," said Utgoff.

"For example, in ... fabricated metals, the employment was up but that's not where the hours were down. So of all the things we could look at to test that hypothesis, we just couldn't find the evidence."