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Companies not in rush to add jobs despite growth

By Ben Klayman

CHICAGO, Oct 30 (Reuters) - U.S. economic growth may have sizzled in the third quarter, but unimpressed corporate executives said on Thursday that job growth and long-term business investment are still lagging.

"We're going to wait until I have orders in hand," said John Kispert, chief financial officer of KLA-Tencor Corp. , a top manufacturer of equipment used in microchip production, in regards to hiring more workers and making new investment.

"I'm not going to react to any macro indicator," he told Reuters.

The U.S. Commerce Department reported Thursday that gross domestic product grew in the July-September quarter by 7.2 percent, the fastest rate in more than 19 years, as consumers went on a buying spree and businesses boosted capital spending.

However, as the economic recovery picked up steam in the third quarter, 41,000 nonfarm jobs were lost, bringing the total lost since President George W. Bush took office in 2001 to 2.6 million. The Bush administration has vowed not to rest until the job market catches up with the recovery.

Some economists are referring to this as the "jobless recovery" because companies continue to shed jobs as they use technology to boost output.

"It's going to be a very gradual recovery as the economic numbers get better," AutoNation Inc. Chairman and Chief Executive Mike Jackson told Reuters.

The head of the nation's largest auto dealership group said employment will lag in this recovery, noting that "the consumer remains fragile and very value-oriented."

Consumer products maker Newell Rubbermaid Inc.'s president and CEO said the impact of cuts at large companies is still being felt.

"I still think that the overall macroeconomic environment worldwide is a bit sluggish," said Joseph Galli. "There've been so many manufacturing closures and so many downsizing activities in Fortune 500 companies that I still think there's an impact there."

Newell Rubbermaid has closed 73 factories worldwide in the last 2-1/2 years. It said on Thursday it moved production from four factories to lower-cost countries, including China, during the third quarter.

NOT READY TO CELEBRATE

Robin Adams, chief financial officer of American Axle & Manufacturing Holdings Inc. , said the Detroit-based auto parts maker is also not ready to celebrate.

"I hope this is the start of a clear indication of growth in the economy, but we would like to see a few (positive) reports in a row, consistently," he said in an interview.

Two other reports on Thursday suggested a firmer recovery was taking hold as new claims for jobless benefits suggested stability and companies spent more on wages and benefits.

That optimism was reflected by United States Steel Corp. Chairman and CEO Thomas Usher, who said the reports echo what his company has seen.

"We've seen a sharp uptick in our orders and it's very broad based," he told Reuters. "The kind of numbers that came out this morning are consistent with what we've been seeing."

Nevertheless, the U.S. steel maker is cutting jobs and has no plans to build new plants, even as it looks to increase output.

Boosting output through higher productivity while maintaining or shedding employment is the new model for companies, said John Challenger, CEO of Chicago outplacement firm Challenger, Gray & Christmas Inc.

"I don't think real job growth is going to occur until the next cycle in the economy," he said. "This expansion we are in -- and we are in an expansion -- is about growing in a different kind of way."

One economist said the recovery is gaining strength, but consumers want to see companies hiring more workers before they will feel more comfortable.

"Until we actually see real and sustained jobs growth, the fear will linger," said John Hancock Financial Services Inc. Chief Economist Bill Cheney.

He said the strong GDP report does not mean the Federal Reserve Bank will raise interest rates.

"As long as GDP growth comes from productivity rather than hiring, the Fed will remain on the sidelines," Cheney said.

(Additional reporting by Michael Ellis in Detroit, Daniel Sorid in San Francisco, Michael Erman in New York, Tim Ahmann in Washington, and Brad Dorfman and Susan Kelly in Chicago)