Tucked away in a Columbia office building, in a room that a year ago sat empty, Saji Akhtar last week fed one stack after another of health insurance forms into a refrigerator-size machine, which thumped and whirred and spat out doctors' scribbles in digital form. Lately, he's been so busy he sometimes has to skip lunch and work into the night scanning the documents.

But his employer, Dakota Imaging Inc., isn't planning to give him much more help anytime soon.

"Business could increase by 100 percent and we'd still not need a whole lot more people," said Ron Diegelman, chief financial officer of Dakota, which has cut a third of its staff over the past three years.

Dakota is part of the central paradox of the economy. Although the nation is producing more goods and services, corporations are making more money and stocks are soaring, companies are not creating many jobs.

The job market is better in the Washington area than in most of the country. The region has an unemployment rate of 3.1 percent, barely half that of the United States as a whole, although it remains high in some parts, especially the District. The Washington area has fared better because it has fewer businesses in the troubled manufacturing industry than most places and federal government spending has led contractors to add thousands of positions.

Still, the region is adding jobs at an annual rate of only 1 percent, compared with an average of 2.6 percent over the past two decades. And recent job growth has been uneven throughout the region. In the 12 months ended in November, the District added 5,000 jobs, suburban Maryland gained 2,500 jobs and Northern Virginia, with its huge concentration of government contractors, picked up 22,000 jobs.

Many companies are being buffeted by broad forces that have made them conservative in their hiring decisions, even as the economy improves. Dakota, for example, expects sales to increase 50 percent this year but plans to add only a dozen employees to its 100-person workforce, a move that would still leave it a smaller company than it was four years ago.

Firms say that, after going through recent layoffs, they are waiting as long as possible to expand their payrolls.

"We call it a just-in-time approach to hiring," said Sean Huurman, global recruiting director of BearingPoint Inc., a McLean-based consulting firm.

Throughout the Washington region, executives cite three reasons for the restricted hiring. Technology and other advances have made workers more productive. Companies that expanded too quickly during the boom are not going to hire until they get rid of their excess capacity. And, when they do expand, many firms have used more consultants or temporary workers than before.

"Hiring new people makes me very nervous right now," said Michelle Boggs, chief executive of McKinley Marketing Partners Inc., a 10-person firm in Alexandria that finds temporary marketing executives for large companies.

So far, she has been able to do more with less because of improved productivity. At its peak in 2000, McKinley Marketing had 14 employees and $13 million in revenue. Those figures dropped to eight employees and sales of $6.5 million.

Business is again on the rise, but even if sales get back to where they were three years ago, Boggs said, the firm will need only 12 people to do the work once performed by 14.

To understand why, look at Katie Wells's desk. She manages the recruiting of marketing executives for the firm, and two years ago her desk would have been covered with paper forms, and her days would have been spent collating information about potential hires. Now, most of that work is done by a computer, cutting in half the time she spends shuffling papers and leaving her more time to evaluate candidates.

Productivity often improves at the beginning of a recovery. The question is how long will it be before corporations hit their productivity limits and begin to hire. Economists are predicting that government data to be released next week will show that in 2003 Americans produced about 4 percent more goods and services for each hour worked than they did the year before.

In Arlington, the issue for Henninger Media Services Inc. is excess capacity. Henninger entered Chapter 11 bankruptcy protection in July 2002. It cut its staff from 235 to 82, closed half its 50 edit suites and rented out a quarter of the space in its headquarters. It emerged from bankruptcy in April.

Henninger's problems came about not because people were watching fewer cable nature documentaries or political candidates were producing fewer campaign commercials -- two of its major businesses. Indeed, chief executive Robert L. Henninger figures that total demand for both services has risen over the past two years.

The problem in the video-editing business was too much supply of the kind of expensive and sophisticated equipment used to edit videos. Lauren Meschter last week sat in a dark room at Henninger headquarters removing the greenish tint from video of a herd of buffalo rumbling across the South Dakota plain. The number of such rooms in the region has expanded tenfold in the past decade, Henninger estimates, which he said is a major reason for the company's bankruptcy reorganization.

Henninger estimates there are about 1,000 professional-caliber video-editing booths in the Washington area now, 10 times as many as a decade ago. The large supply drove down the price for an hour of high-quality video post-production work from $450 to $350.

This situation mirrors that of the U.S. economy as a whole. Much of the economic slump has been the process of cutting excess capacity. Companies won't do much hiring until demand and capacity are again in equilibrium.

That equilibrium may be getting closer. According to the Federal Reserve, industrial companies nationwide were using 75.8 percent of their capacity in December, up from 74.9 percent a year earlier. For the service companies that dominate the Washington area's economy, there aren't such all-inclusive numbers. One indicator, however, is the area's office vacancy rate, which has dropped in the past year to 12 from 12.8 percent, according to CoStar Group Inc.

In the area video production business, things also seem to be turning around. During the boom, a used Digital Betacam mastering machine would sell for $32,000 or so, Henninger said. When his company was reorganizing last year, it could get only $24,000 for the machines because of the oversupply of professional video equipment. But in an auction by a competitor this month, the machines sold for $27,000.

Henninger said he expects to hire five to eight additional people this year, but he quickly added, "After going through what we have, we're not going to rush into anything."

The availability of talented temporary workers has also allowed companies such as Flavorx Inc. of Bethesda to avoid making a lot of hires. With popular flavors such as grape (for kids) and Angus beef (for dogs), it has almost doubled the number of pharmacies that use its medical flavoring products in the last year, from 8,000 to 15,000.

Despite the new business, when a new computer system was needed, Flavorx retained an outside contractor to install and manage the new server rather than hire an employee, as it would have in the past, said chief executive Kenneth L. Kramm.

The independent contractor, Malcolm Jones, said his previous employer, a software company, moved away. So while looking for a permanent job, he spent five weeks at Flavorx running wires, installing software and making sure the e-mail worked. But the improving economy is helping Jones. He recently was offered a permanent job by a contractor for the World Bank and started work two weeks ago.

There have been a few bright spots in Washington's job market. The number of jobs tied to the booming housing market -- real estate brokers, construction workers and the like -- is rising. So are retail jobs. But the one sector adding jobs in large numbers is government contracting. In 2002, the government and its contractors added 38,100 jobs in the region, according to Alexandria research firm Delta Associates, and many analysts believe the number will be higher for 2003.

The bad news for job seekers is that the positions tend to be in relatively narrow fields.

WamNet Government Services Inc. in Herndon does big high-tech projects for the government. It is now setting up computer intranets on Navy and Marine bases around the world. The company started last year with 221 employees and finished it with 650. Most of those jobs, however, require high-level skills, such as those of network engineers.

Contractors increasingly are fighting it out with one another for those kinds of workers, especially those with security clearances. Wages for mid-level project managers with five to 10 years of experience and a security clearance are now as high as $130,000 a year, said Robert D. Merkl, president of SecureIT, a Rockville firm that helps match such workers with potential employers. That's close to what they could have made at well-funded dot-coms during the Internet boom of the late 1990s.

WamNet plans to hire 50 people in the Washington area this year and is offering its employees a $3,000 bounty for finding people for hard-to-fill positions.

But away from Washington's government-related economy, there are still few of those four-figure recruiting bonuses, and hiring is more cautious. According to industry surveys and interviews with dozens of executives, more companies seem to be taking the approach of I3 Solutions Inc. in Sterling. The company develops custom software to help companies do things such as juggle work orders or bill clients more reliably.

In a period of weeks in late 2000 and early 2001, customers canceled jobs and stopped paying their bills. In 2000, I3 had $6.5 million in sales and about 75 employees. Last year, it had $1.5 million in revenue and a workforce of 25.

Chief executive Scot Johnson predicts that sales will increase to $1.8 million in 2004. He hired one more engineer in late December. Based on what his clients are telling him, he expects to add a couple more in the coming months.

"I'm only going to expand if my clients drag me there," Johnson said.

Saji Akhtar, who works at Dakota Imaging Inc. in Columbia, says he sometimes skips lunch and works late to finish scanning health insurance forms. Company officials say they would not need many more employees even if business doubled."Hiring new people makes me very nervous right now," said Michelle Boggs, chief executive of McKinley Marketing Partners Inc. of Alexandria.