Spring Temperatures Don't Thaw Employment Deep Freeze

By Theresa Minton-Eversole 

With a dearth of good news on the economic front, manufacturing and service sector companies will keep a tight rein on payrolls in April, according to the latest Society for Human Resource Management (SHRM) Leading Indicators of National Employment (LINE) survey.

The LINE report examines four key areas: employers’ hiring expectations, new-hire compensation, difficulty in recruiting top-level talent and job vacancies.

Continuing the trend of recent months, April 2009 hiring expectations will hit four-year lows, and recruiting difficulty was nearly nonexistent in March 2009. Likewise, wages and benefits packages for new hires are shrinking, with employers in both sectors reporting decreases in new-hire compensation, which was at the lowest March levels in four years in both sectors. 

Employment Expectations	Manufacturing	Service
Employment expectations for April 2009 at four-year lows in both manufacturing and service sectors.	-53.5	-40.7
Recruiting Difficulty
Recruiting difficulty in both sectors in March 2009 was down sharply compared with March 2008.	-24.7	-32.3
New-Hire Compensation
Wages and benefits packages for new hires continued to shrink in March 2009 compared with March 2008.	-10.0	-7.0

Source:  SHRM Leading Indicators of National Employment (LINE)

Manufacturing, Service Sectors Still Shedding Jobs

By nearly a two-to-one margin, manufacturing sector survey respondents plan to eliminate jobs in April 2009 (31.2 percent will decrease payrolls, 16.7 percent will be hiring). The number of manufacturing companies adding jobs in April will fall by more than two-thirds from April 2008. April has traditionally been a strong month for manufacturing job growth. In April 2007, more than 60 percent of companies added to their payrolls. But the number of hiring companies has dwindled to 16.7 percent in just two years. The manufacturing sector lost 1.3 million jobs from the start of the recession in December 2007 through February 2009, according to the Bureau of Labor Statistics (BLS).

Hiring in the service sector, while still far behind 2008 levels, had shown some promise in February and March 2009. During each of those months, more companies conducted hiring than layoffs. In April, however, the sector has regressed: A net of 5.5 percent of companies will cut jobs during the month (21.7 percent will add to payrolls, 27.2 percent will conduct layoffs). April 2009’s negative net of 5.5 percent is a four-year low for LINE, down from a peak reached in April 2006, when 53 percent of service sector companies added jobs.

Abundance of Talent Available to Hiring Companies

For the first time in four years in March 2009, LINE recorded single-digit response levels for those reporting increased difficulty with recruiting. In the manufacturing sector, only 2.7 percent of respondents reported increased recruiting difficulty in March, compared with 24 percent who reported less difficulty.

The gap was even wider in the service sector. In March 2009, just 1.7 percent of those respondents reported increased recruiting difficulty, compared with 25.4 percent that had less difficulty.

“With millions of people seeking work and fewer opportunities that exist, a reverse to this trend in the LINE recruiting difficulty index is not likely in the near future,” according to Jennifer Schramm, SHRM’s manager of workplace trends and forecasting.

Exempt, Nonexempt Vacancies Dropping Steadily

HR professionals in the manufacturing and service sectors reported declines in exempt vacancies in March 2009 compared with March 2008. In the manufacturing sector, a net total of 8.3 percent of respondents reported decreases in exempt vacancies (8.7 percent reported increases, 17 percent reported decreases).

In the service sector, a net total of 11.3 percent of respondents reported declines in exempt vacancies in March (7.7 percent reported increases, 19.0 percent reported decreases). In January 2009, there were 3 million job openings in the United States. That represents a 35 percent drop from September 2007, when the number of job openings began a gradual monthly decline, according to the BLS.

A net total of 9.2 percent of manufacturing respondents reported that nonexempt vacancies declined in March 2009 as well (9.6 percent increased, 18.8 percent decreased).

In March 2008, manufacturing respondents were still reporting increases in vacancies (a net total of 10.5 percent), according to the LINE survey data, indicating that manufacturers were still hiring only 12 months ago and had yet to face the worst of the economic downturn.

For nonexempt service positions, a net total of 8.4 percent reported decreased vacancies in March 2009 (15.0 percent increased, 23.4 percent decreased).

With vacancy levels falling in both sectors, LINE data show that more employers are cutting jobs or imposing hiring freezes during the economic downturn. Likewise, the BLS reported in January 2008 that the national job openings rate was 2.2 percent—the lowest level in five years.

Increases for Wages, Benefits at Four-Year Low

Many companies have scuttled hiring plans during the recession, and wages and benefits are getting trimmed in the effort to control costs.

In the manufacturing sector, a net total of 1.3 percent of respondents said they would decrease new-hire compensation in March 2009 (1.3 percent increased, 2.6 percent decreased). That is the first time in four years that the net total for manufacturers ventured into negative territory.

The service sector is also showing a four-year low for March 2009 for net increases to new-hire compensation packages. A net total of 2.2 percent of companies reduced wages and benefits packages for new hires in March (1.2 percent increased, 3.4 percent decreased).

“The low response total in both sectors indicates that many companies are likely keeping wages and benefits packages flat for new hires,” Schramm said.

The LINE report is based on a monthly survey of private sector human resource professionals at more than 500 manufacturing and 500 service-sector companies. Together, these sectors employ more than 90 percent of the nation’s private sector workers.