Gradual Improvement Expected for August Hiring

8/7/2009 By Theresa Minton-Eversole



Layoffs continue to permeate the labor market, but more companies in the manufacturing and service sectors are hiring compared with the first few months of 2009, according to the Society for Human Resource Management’s (SHRM) Leading Indicators of National Employment (LINE) Report survey for August 2009.

Hiring expectations in August will lag from those of 2008. Though hiring is down in August 2009 compared with the same time in 2008, more companies in the manufacturing and service sectors will add jobs rather than conduct layoffs. In fact, August 2008 marks the highest level of hiring in the manufacturing sector since October 2008. In the service sector in August, the hiring rate will surpass the layoff rate for the fourth consecutive month.

This news builds on some recent evidence that the job market is gradually improving, albeit very slowly.

“Though year-over-year increases in the employment expectation index have not been positive since November 2007 and remain down in August, this is the second month in a row when more employers in both the manufacturing and service sectors expect to add jobs rather than conduct layoffs,” noted Jennifer Schramm, manager, SHRM workforce trends and forecasting.

Wages and benefits packages for new workers, however, continue to decline. New-hire compensation rose at the slowest rate in July 2009 in five years in the manufacturing and service sectors.

Employment Expectations	Manufacturing	Service
Employment expectations are at five-year lows for August in both manufacturing and service sectors.	-11.5	-2.8
Recruiting Difficulty
Recruiting difficulty in both sectors in July 2009 is down compared with a year ago.	-5.5	-29.7
New-Hire Compensation
The rate of increase for wages and benefits packages in July 2009 has fallen compared with a year ago in both sectors.	-0.7	-8.2
Source: SHRM Leading Indicators of National Employment (LINE), www.shrm.org/line.

The LINE Report examines four key areas: employers’ hiring expectations, new-hire compensation, difficulty in recruiting top-level talent and job vacancies. It is based on a monthly survey of private-sector human resource professionals at more than 500 manufacturing- and 500 service-sector companies. Together, these two sectors employ more than 90 percent of the nation’s private-sector workers. The SHRM LINE indices are not seasonally adjusted, however, so users are encouraged to take seasonality into consideration by comparing the LINE indices for the current month with the comparable LINE indices for the same month one year earlier.

Employment Expectations, Recruiting Difficulty

The LINE Report’s employment expectations index has tracked in lockstep with national economic patterns noted by the U.S. Bureau of Labor Statistics (BLS) since December 2007, when the nonprofit National Bureau of Economic Research said the recession began. The last time the year-over-year change in this index was positive was November 2007. That more employers in the manufacturing and service sectors will add jobs rather than conduct layoffs in August 2009 will not change that fact.

In the manufacturing sector, a net total of 11.0 percent of respondents reported they will add jobs in August 2009. In the service sector, a net total of 16.9 percent of companies will add jobs in August.

LINE’s recruiting difficulty index measures how difficult it is for firms to recruit candidates to fill the positions of greatest strategic importance to their companies.

“Recruiting difficulty continues to hover at record lows,” said Schramm. “For the first time in five years in July [2009] and for the fifth consecutive month this year, LINE recorded single-digit response levels for those reporting increased difficulty with recruiting.”

The low response totals can likely be attributed to fewer HR professionals engaging in recruiting coupled with an increased number of people looking for work. Under such circumstances, HR professionals can afford to be selective.

In the manufacturing sector, a net of 13.1 percent of companies reported less difficulty with recruiting in July 2009 (2.8 percent had more difficulty, 15.9 percent had less). This is the second year in a row in July that more manufacturers reported an easier time recruiting in July than those who reported having more difficulty.

In the service sector, a net of 19.9 percent of companies had less difficulty recruiting in July 2009 (3.0 percent had more difficulty, 22.9 percent had less). With millions of people seeking work and fewer opportunities that exist, this trend in the LINE recruiting difficulty index is not likely to reverse in the near future.

New-Hire Compensation

With hiring down during the recession and a large pool of job seekers in the market, some companies are reducing the wages and benefits they are offering new hires in an effort to control costs.

In the manufacturing sector, a net total of 0.3 percent of respondents said they would decrease new-hire compensation in July 2009 (3.1 percent increased, 3.4 percent decreased). That’s the lowest July response total in five years for manufacturers reporting increases to new-hire compensation.

In the service sector, the trend of reducing new-hire salaries and benefits was slightly more pronounced. A net total of 1.6 percent of companies reduced wages and benefits packages for new hires in July 2009 (2.4 percent increased, 4.0 percent decreased).

“Many companies are continuing to reduce the wages and benefits they are offering new hires,” Schramm said. “With so many job seekers out looking, employers are finding it much easier to shrink these new-hire pay packages in their efforts to control costs and still find a ready pool of qualified job candidates willing to work at these reduced rates.”

Exempt, Nonexempt Job Vacancies

LINE Report data cover exempt vacancies, or primarily salaried positions, and nonexempt vacancies, mostly hourly wage positions.

In the manufacturing sector, a net total of 3.0 percent of respondents reported increases in exempt vacancies in July 2009 (15.3 percent reported increases, 12.3 percent reported decreases). Among the major job sectors, manufacturing had the second-lowest number of job openings in May 2009, trailing only the construction industry, according to the BLS.

In the service sector, a net total of 10.3 percent of respondents reported declines in exempt vacancies in July 2009 (12.0 percent reported increases, 22.3 percent reported decreases). The tight hiring conditions detailed in LINE match other data. In May 2009, there were 2.6 million job openings in the U.S.—a decline of 1.5 million from May 2008, according to the BLS.

In contrast, nonexempt employment typically decreases by a greater percentage than exempt employment during economic downturns and increases by a larger percentage during economic expansions. Nonexempt vacancy levels did not change much in July 2009 from the same time in 2008 in either sector.

A net total of 6.9 percent of manufacturing respondents reported that nonexempt vacancies decreased in July 2009 (17.2 percent increased, 10.3 percent decreased). July’s data matches that of July 2008, when manufacturing respondents also reported a slight increase in nonexempt vacancies.

For nonexempt service positions, a net total of 6.1 percent reported increased vacancies in July 2009 (18.2 percent increased, 12.1 percent decreased).

Q3 Employment Outlook: More Market Optimism, Dismal Hiring Plans

By Theresa Minton-Eversole




There are signs of increased faith in the U.S. job market for the third quarter of 2009, although many companies are still having difficulties projecting their hiring plans, according to the latest Labor Market Outlook (LMO) Survey by the Society for Human Resource Management (SHRM).

The survey examines recruiting and hiring trends across six months based on a quarterly survey of public- and private-sector human resource professionals at small, medium and large U.S. firms who have a direct role in the staffing decisions at their companies.

“The good news is that HR professionals are more optimistic about the third quarter than they were in the first half of the year,” said Jennifer Schramm, SHRM’s manager of workplace trends and forecasting. “But the bad news is that they continue to forecast fairly flat payrolls throughout the quarter.”

Thirty-five percent of the nearly 500 HR professionals who responded to an e-mail survey sent to SHRM members in February 2009 said they believe that the job market will improve somewhat during the third quarter of 2009. Another 29 percent said they were neither optimistic nor pessimistic about job growth during the quarter.

Thirty-seven percent of respondents said they were pessimistic about U.S. job growth and expect increased job losses. This, however, is a major reversal from the LMO survey for the second quarter of 2009, when 70 percent of respondents expressed pessimism and predicted deeper cuts in the job market.

The degree of optimism did not vary much by U.S. geographical region. Not surprisingly, respondents from the Midwest and Southeast regions expressed the highest degree of pessimism (39 percent), while those in the West expressed the greatest degree of optimism (41 percent).

Even with the boost in confidence, many respondents said their companies are planning to hold the line on hiring in the third quarter. A majority of respondents (56 percent) said they will remain at their current staffing levels in the third quarter. In every size category of company that responded to the survey, at least 72 percent of respondents plan to keep payrolls flat or eliminate jobs in the third quarter of 2009. The highest concentration of respondents who are maintaining or decreasing total staff (86 percent) came from large companies, those with more than 500 employees.

Twenty-one percent of companies expect to hire in the third quarter. Privately owned for-profit entities (29 percent) report adding the most jobs, followed by the government sector (24 percent), publicly owned for-profit companies (18 percent) and nonprofits (14 percent).

Government data support these findings, showing that hiring conditions are still difficult but are improving. In May 2009, for example, employers eliminated 345,000 jobs—a terrible month by many standards but only about half the average monthly decline for the prior six months, according to the U.S. Bureau of Labor Statistics (BLS).

Risks of Wage Stagnation

Though less attention has been paid to the trend, many companies are increasing their use of wage freezes and salary cuts. The result: Wage growth has slowed to levels not seen in decades. If the trend continues, experts say, it could have a prolonged negative impact on the country’s economic recovery.

While little current data is available to suggest that wages have taken a downward spiral, there is evidence of corporate cutbacks used to control operating costs. For example, companies that intend to raise salaries in 2009 intend to increase workers’ wages only by a median 2.5 percent, according to SHRM’s 2009 Human Capital Benchmarking Survey. This is down from 3.5 percent in 2008 and the lowest increase in the survey’s five-year history.

Equally troubling, writes Joe Coombs, report author and specialist for SHRM workplace trends and forecasting, is that some of the largest U.S. job sectors are raising salaries below that median rate in 2009. Take durable goods: Manufacturers are planning a nominal 1.5 percent wage increase, while professional, scientific and technical services companies collectively expect to increase wages by only 1.9 percent, according to survey data. Further, government sector employers report they’ll raise salaries by just 2.1 percent in 2009.

Salary cuts, unlike freezes, are extremely rare during periods of slow economic growth, though many employers are not shying away from them during this recession. Compensation for new hires is being curbed at a rapid rate, according to data from SHRM’s Leading Indicators of National Employment (LINE) Report, which show that the rate of increase for new-hire compensation from November 2008 to June 2009 fell in the manufacturing and service sectors from the previous year.

Because new-hire compensation growth is a leading indicator of overall wage trends, this suggests that at this point in the recession, overall compensation rates for all workers might begin to be affected.

The BLS has tracked compensation costs for more than 30 years on a quarterly basis, and its employment cost index (ECI) numbers for the first quarter of 2009 caused many observers to do a double-take. For the January to March 2009 time frame, wages and salaries for private industry workers rose just 0.2 percent from the previous quarter—the lowest increase since the BLS began recording the data in 1975.

“There is a fair amount of information that shows things are particularly weak,” said BLS economist Wayne Shelly in the report. “You can clearly see the deceleration.”

Shelly noted, however, that for the past 10 years the index has remained relatively flat and has stayed ahead of the Consumer Price Index. And low inflation has made it harder for employees to get upset over small pay increases.

If unemployment remains elevated for years and is coupled with depressed wages, it will have a resounding effect on the economy’s ability to recover. For starters, low salary growth rates will impact consumer spending, which could lead to a significantly negative impact on the overall economy.

In addition, “the suppression of wage increases is clearly a potential morale killer for employees,” writes Coombs. “It could also lead to loss of loyalty from workers and, without adequate compensation, top-tier talent can quickly develop a roving eye for work elsewhere. [So] for some small employers, this may be a good opportunity to hire highly qualified job candidates.”