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Can The Auto Industry Lead The Jobs Recovery?

First Posted: 08/02/11 04:34 PM ET Updated: 10/02/11 06:12 AM ET

Auto Industry Jobs Recovery

As the country continues to face high unemployment and slow economic growth, a new report suggests that America's best hope for job creation may lie with the auto industry.

Sixty-two percent of auto executives polled in a new report by audit tax and advisory firm KPMG said they "expect to hire people in the coming year," compared with only 52 percent of executives polled from all sectors.

Further, 71 percent of autos executives said they "expect to increase their capital spending in the coming year," compared with an average of 59 percent of all executives.

But industry analysts caution that these statistics should be taken with several caveats.

Kristin Dziczek, director for the Labor and Industry Group at the Center for Automotive Research, told HuffPost that the increased hiring was, in part, driven by the fact that the automotive sector "took a deeper hit" and thus has more ground to make up in terms of rehiring employees.

She also said the predicted hiring "is not just to meet increased demand, but also to re-engineer the products and processes to meet consumer and regulatory changes," -- among them, the new fuel economy standards President Obama announced last Friday.

Jeff Schuster, executive director of forecasting at JD Power and Associates, agreed, saying, "The domestic players have been through a lot. The [auto] industry cut too deep -- and now we're seeing the reverse of that."

But he questioned whether the industry would actually lead the country to a stronger recovery this year.

Schuster said that at the beginning of the year, forecasters had predicted a strong rally for the sector, but he said that several factors have dampened industry recovery, including the disaster in Japan, which created a shortage of auto parts.

"The parts shortage really wasn’t felt in full until June," said Schuster. "There's a lag between when a vehicle is built and when it shows up at the dealer. And that lag gave a false sense of how bad [the shortage] would be earlier this year."

With shortages resulting in higher prices, Schuster said, "There's not a compelling reason for consumers to jump back in -- and the economy has not exactly been cooperative." Consumers, he added, "are still jittery with large ticket purchases" like autos, "even if there's pent-up demand."

But despite the stumbling blocks the industry has faced, Dziczek and Schuster both felt that the auto sector had the potential to drive strong job growth -- if not necessarily to the levels once hoped for.

"We've revised our forecast for the economy and auto sales. The external variables -- gas prices, inventory shortages -- will push this recovery into 2012," said Schuster. "I think we'll get there -- but the level and magnitude of the recovery will not be where we expected it to be."

Said Dziczek: "I can't think of any sector that will beat [autos]. The sheer size of the industry means that relatively small changes can outpace very large changes in other industries."

But she added that "even with this aggressive pace of hiring, the auto industry still will not return to employment levels even as recent as the year 2000."

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