Modest Hiring Gains for Manufacturing, Services Expected in October

The U.S. job market should offer increased opportunities for workers in the manufacturing and service sectors in October 2009, according to the Society for Human Resource Management’s (SHRM) Leading Indicators of National Employment (LINE) survey report for October 2009.

Though hiring was down in September 2009 compared with September 2008, the latest LINE report marks the fourth straight month that job additions will outpace layoffs in both the manufacturing and service sectors. September 2009 vacancies increased from September 2008 in three out of four job categories for manufacturing and services.

“Though the labor market remains weak, the pace of layoffs does appear to have slowed, and job seekers may find increased opportunities in both the manufacturing and service sectors in October,” said Jennifer Schramm, manager, SHRM workplace trends and forecasting. “Exempt job vacancies rose in both sectors and in nonexempt service-sector jobs, another indication that labor market conditions might be improving slightly.”

Employment Expectations	Manufacturing	Service
Hiring will surpass layoffs in October 2009 in both the manufacturing and service sectors.	-2.5	-6.4
Recruiting Difficulty
Both sectors reported little difficulty in finding top-level talent in September 2009.	-9.9	-10.1
New-Hire Compensation
Wages and benefits packages in both sectors rose at the slowest rate in five years during September 2009.	-6.9	-4.9

Source: SHRM Leading Indicators of National Employment (LINE), www.shrm.org/line.

The LINE employment 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. These sectors employ more than 90 percent of the nation’s private-sector workers.

Employment, Vacancy Expectations

The LINE employment expectations index provides an early indication of the U.S. Bureau of Labor Statistics (BLS) numbers. The index has tracked in lockstep with national economic patterns since the recession began in December 2007. The last time the year-over-year change in this index was positive was November 2007. That will not change in October 2009, but for the fourth month in a row, more employers in the manufacturing and service sectors will add jobs rather than conduct layoffs.

In the manufacturing sector, a net total of 17.9 percent of respondents reported they will add jobs in October 2009 (33.3 percent will add jobs, 15.4 percent will eliminate jobs). That represents the highest net gain in hiring for manufacturing since October 2008. In the service sector, a net total of 13.4 percent of companies will add jobs in October 2009, the sixth straight month that the hiring rate will surpass the layoff rate in that sector.

LINE data cover exempt vacancies, or primarily salaried positions, and nonexempt vacancies, which are mostly hourly employees. Changes in the number of job vacancies can be one of the earliest indicators of a shift in the balance between labor supply and demand.

Vacancies, or open positions that employers are trying to fill, for salaried jobs inched up in both sectors in September 2009, according to the LINE report. In the manufacturing sector, a net total of 10.7 percent of respondents reported increases in exempt vacancies in September 2009 (19.3 percent reported increases, 8.6 percent reported decreases). This is an increase of 2.8 percent from September 2008, and the second consecutive month that exempt vacancies have increased from the previous year.

In the service sector, a net total of 0.4 percent of respondents reported increases in exempt vacancies in September 2009 (10.9 percent reported increases, 10.5 percent reported decreases). For the service sector, this is the second consecutive month that exempt vacancies have risen from the previous year.

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‘Many organizations may hold off on adding
to overall head count while they try
to gauge the strength of the economy.’

Jennifer Schramm, manager, SHRM workplace trends and forecasting
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Vacancies for nonexempt positions—or hourly jobs—also increased in the service sector in September 2009; however, they decreased in the manufacturing sector.

For nonexempt service positions, a net total of 6.9 percent reported increased vacancies in September 2009 (24.3 percent increased, 17.4 percent decreased). This marked a small jump from September 2008, when a net total of 0.8 percent of service companies reported increases in nonexempt vacancies.

A net total of 8.7 percent of manufacturing respondents reported that nonexempt vacancies increased in September (20.5 percent increased, 11.8 percent decreased). This is a net decline from September 2008, but the fact that more manufacturers had increased vacancies during the month suggests that work is being ramped up slowly at some companies.

In addition, the Federal Reserve reported that industrial production increased for the second straight month in August 2009.

“It is too soon to tell when demand might pick up,” said Schramm. “Many organizations may hold off on adding to overall head count while they try to gauge the strength of the economy. Instead they may try to make up for lost revenue by boosting the productivity of their existing staff or by taking on temporary workers.”

Recruiting Difficulty, New-Hire Compensation

Should companies choose to hire, however, there is skilled talent to be had. Both sectors reported little difficulty in landing top-level talent in September 2009, although the rate of increase in new-hire compensation falls behind the previous year for the 12th straight month.

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. For the seventh consecutive month, LINE recorded single-digit response levels for those reporting increased difficulty with recruiting in September 2009. The low response totals can likely be attributed to fewer HR professionals engaged in recruiting during the economic downturn. And with an increased number of people looking for work, HR professionals can afford to be selective.

In the manufacturing sector, a net of 10.8 percent of companies reported less difficulty with recruiting in September 2009 (3.2 percent had more difficulty, 14.0 percent had less). In the service sector, a net of 7.3 percent of companies had less difficulty recruiting (9.8 percent had more difficulty, 17.1 percent had less).

With millions of people already seeking work and many others expected to resume their job searches as the economy improves, this trend in the LINE recruiting difficulty index is not likely to reverse soon.

The rate of increase for new-hire compensation has been falling for a year as some companies have been reducing the wages and benefits they are offering new hires in an effort to control costs. For the 12th straight month, increases in wages and benefits packages in September 2009 will fall behind totals from the previous year.

In the manufacturing sector, a net total of 0.3 percent of respondents said they would decrease new-hire compensation in September 2009 (3.2 percent increased, 3.5 percent decreased). That is the lowest September response total in five years for manufacturers reporting increases to new-hire compensation.

But in the service sector, more companies raised new-hire compensation rather than reduced it in September 2009. A net total of 5.6 percent of companies increased wages and benefits packages for new hires (6.9 percent increased, 1.3 percent decreased).

Still, this was a drop of 4.9 percent from September 2008, when a net total of 10.5 percent of service companies increased new-hire compensation.

“Recruiting difficulty and new-hire compensation rates remain down, indicating that this is still a very tough market for job seekers,” said Schramm.