Illinois Business Journal - Housing boom drives strong economy-employment surge

This past year, at least the first 10 months of it, was a very good year for job growth in Southwestern Illinois as 17,000 more people were employed in October than in December of 2004. This represented a 5.4 percent increase in employment and produced a corresponding 1 percent decline in unemployment.

Experts point to a residential building boom and growing confidence as the base reasons for the surge.

"There's a lot of growth in construction and housing development," said Vicki Niederhofer, labor market economist with the Illinois Department of Employment Security. "Every time a new subdivision is built, you have a lot of ancillary development - new retail centers spring up. If you drive down Frank Scott Parkway to Shiloh, for example, and hit Green Mount Road, you can almost see it unfolding in front of your eyes."

Sean Flower, president of American Heritage Homes, isn't surprised. He said the Home Builders Association of Greater St. Louis did a study about a year ago that showed the economic impact on the community of each new home built was about $5,000 per year. In part, that impact is due to the ripple effect that new housing and an expanding population has on the economy.

"We've been involved in some mixed-use, residential-commercial development and we find that commercial users do not go somewhere unless there's a pretty proven record of residential strength in the area," said Flower. "They want to see a certain number of rooftops."

Flower says he thinks residential development often times gets a bad rap from cities and school districts.

"There's this big perception on the part of cities and schools that housing hurts everybody," he said. "They say all the houses are killing the schools because there's no benefit, but the fact is that there's an overall benefit to the whole area. They're only looking at property taxes, but the residential development ends up increasing the property base a ton, too."

According to David Stoecklin, program administrator for the Madison County Employment and Training Department, the county's unemployment rate has been declining for the last couple of years. Stoecklin says that Madison County's unemployment rate (5.1 percent) is now below both the state and national unemployment rates, and he expects that to continue.

"I think Madison County has a really strong economy," said Stoecklin. "The whole residential building boom is feeding this employment growth in a way that is unreal."

Stoecklin also points to another factor driving the higher employment: Missouri residents moving to Illinois.

"We are much more of a bedroom community than at any other time," he said. "You have more and more Missourians moving over here and continuing to work in Missouri."

Dianna Barron, president of Adecco Staffing Services, agrees that the residential building boom is driving a large part of the job growth, but she also sees a resurgent confidence on the part of employers.

"I'm seeing it in my own business," said Barron. "It's even tougher to find individuals with the right kind of skills. There is a lot more competition for that smaller number of qualified workers. When we have somebody that we have recruited who is actively looking for a new position or to change positions, we have to work quickly to represent that person and present them, because otherwise they're going to be gone. We have to act quickly and get them in our fold within three to four days," she said.

Barron says that this hot employment market is relatively recent, beginning in late summer or early fall. She says the areas of big demand are administrative assistants with knowledge and experience in accounting, spreadsheets, PowerPoint or some other specific software package.

"With those kinds of individuals with that higher training and experience," said Barron, "you blink an eye and they're going to be gone to somebody else. Often times they are getting jobs across the river."

According to Barron, the demand is coming from across the board with the large financial organizations, accounting firms, engineering and the medical sector being some of the hottest.

"Companies are definitely more positive about their ability to make commitments to hiring," Barron said. "Over the last few years there's been hesitancy on the part of companies to offer full-time or career placement positions to individuals. They would be more apt to utilize our services on a project-by-project basis, whereas now we're seeing them turn the corner, coming to us and having us do direct-hire searches. They know they have a slot; they know they want to hire someone; they know they're going to be able to offer that person a whole package. They've looked at their numbers and they're confident that they can commit to and support that additional person or persons," she added.

Barron says she sees a kind of a pent- up demand as there was so much uncertainty in 2002 and 2003 and even to some extent, in 2004. But by late 2005, companies were seeing that they had weathered the storm and were approaching the future with much more confidence.

"A lot of companies have done an excellent job in controlling their expenses and using technology to make them more efficient," said Barron, "so now they are saying, 'O.K., we've streamlined; we've made ourselves very efficient; we want to expand and we need to go out and get more business. And when we do that, we know that we need more support services or we need more people going out and generating this additional revenue stream - and they're going to need more support.' With that, they are looking at planning for the next 12 to 18 months and what it's going to take to hit their targets," she said.