SHRM LINE: Job Market Recovery Will Be Slow

11/6/2009

By Theresa Minton-Eversole

Though the U.S. unemployment rate likely will continue to climb for the next few months, HR professionals in the manufacturing and service sectors expect hiring in November 2009 to surpass levels reached one year ago, according to the Society for Human Resource Management’s (SHRM) latest Leading Indicators of National Employment (LINE) survey.

Hiring is still not widespread, though November 2009 marks the fifth straight month that job additions were expected to outpace layoffs in manufacturing and services. But because the recession has been so long, “any improvements we see now are only improvements on what was already a weak job market one year ago,” cautions Jennifer Schramm, SHRM’s manager of workplace trends and forecasting.

The SHRM LINE data are collected through a monthly survey of human resource executives at more than 500 manufacturing and 500 service-sector firms and focus on four key areas: employers’ hiring expectations, new-hire compensation, difficulty in recruiting top-level talent and job vacancies. The net increasing index is calculated as the percentage increasing minus the percentage decreasing.

Employment Expectations	Manufacturing	Service
Hiring will surpass layoffs in November 2009 in manufacturing and services; the activity is also ahead of the November 2008 pace.	+15.3	+5.9
Recruiting Difficulty	Manufacturing	Service
In October 2009, both sectors reported increased recruiting difficulty during the same month for the first time since January 2007.	+2.8	+13.0
New-Hire Compensation	Manufacturing	Service
For the 13th straight month in October 2009, the rate of increase for new-hire compensation dropped in both sectors.	-3.0	-4.2

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

Employment Expectations, Recruiting Difficulty

November 2009 is the first time that LINE data show that year-over-year hiring has increased in services since February 2008 and in manufacturing since August 2007. Still, says Schramm, “Net expectations are fairly low, indicating that any improvements are developing slowly.”

In the manufacturing sector, a net total of 17.8 percent of respondents reported they will add jobs in November 2009 (32.0 percent adding jobs vs. 14.2 percent eliminating jobs). In the service sector, a net total of 15.8 percent of companies will add jobs in November 2009 (26.1 percent hiring versus 10.3 percent cutting jobs)—the seventh straight month that the hiring rate will surpass the layoff rate in that sector.

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. Interestingly, despite the large number of people unemployed, members of both sectors report having slightly more difficulty in landing top-level talent compared with 2008.

For the eighth consecutive month of 2009, LINE recorded single-digit response levels for those reporting increased difficulty with recruiting. The low response totals can likely be attributed to two factors: fewer HR professionals being engaged in recruiting now and HR professionals’ heightened selection standards attributable to the large number of people looking for work.

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'Any improvements we see now are only improvements
on what was already a weak job market one year ago.’
— Jennifer Schramm, SHRM’s manager of workplace trends and forecasting
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However, the net total in both sectors showed a rise in recruiting difficulty compared with October 2008. In the manufacturing sector, a net of 6.8 percent of companies reported less difficulty with recruiting during October 2009. Still, it is the first time recruiting difficulty has increased on a year-over-year basis in manufacturing since October 2007. In the service sector, a net of 7.8 percent of companies had less difficulty recruiting in October 2009. This marks the first time that recruiting difficulty has increased on a year-over-year basis in the service sector since February 2008.

The results do not indicate a major reversal in recruiting difficulty but do reflect the notion that labor market conditions may be improving slightly from a year ago.

New-Hire Compensation

The rate of increase for new-hire compensation has been falling for more than a year, according to the LINE report, and employers reported that they continued to keep wages and benefits packages in check for new hires in October 2009. The continuing high rate of unemployment and large pool of jobseekers have given many companies the option to reduce the wages and benefits they are offering new hires in a continuing effort to control costs.

In the manufacturing sector, a net total of 0.1 percent of respondents said they would decrease new-hire compensation in October 2009 (2.4 percent increased, 2.5 percent decreased). That is the lowest October response total in five years for manufacturers reporting increases to new-hire compensation.

In the service sector, more companies actually raised new-hire compensation than reduced it in October 2009. A net total of 2.2 percent of companies increased wages and benefits packages for new hires (6.9 percent increased, 1.3 percent decreased). Still, it was a drop of 4.2 percentage points from October 2008, and perhaps an indication that those landing new jobs in October 2009 continue to accept lower wages and benefits during challenging economic times.

“The rate of increase for new-hire compensation continues to fall as it has for over a year,” said Schramm. “Employers are still able to find many willing job applicants even as they keep wages and benefits packages low—a sign that, despite some improvements, the job market overall remains weak.”

Exempt, Non-Exempt Vacancies

But indications that hiring conditions are improving slowly can be found in LINE’s vacancy data. Vacancies, defined as open positions that employers are trying to fill, increased from the previous year in October 2009 in all four job categories for manufacturing and services. 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.

In the manufacturing sector, a net total of 6.2 percent of respondents reported increases in exempt vacancies in October 2009 (15.9 percent reported increases, 9.7 percent reported decreases). This is an increase of 4.1 percentage points from October 2008. In the service sector, a net total of 1.9 percent of respondents reported increases in exempt vacancies in October 2009 (11.9 percent reported increases, 10.0 percent reported decreases). This is the third consecutive month that exempt vacancies have risen in both the manufacturing and service sectors from the previous year.

Vacancies for hourly jobs also rose in both sectors in October 2009. A net total of 4.1 percent of manufacturing respondents reported that nonexempt vacancies increased in October 2009 (18.0 percent increased, 13.9 percent decreased). This increase of 3.9 percentage points from October 2008 suggests that work is being ramped up slowly at some companies. In addition, the Federal Reserve reported that industrial production rose 5.2 percent during the third quarter of 2009, the largest gain since the first quarter of 2005.

For nonexempt service positions, a net total of 15.6 percent reported increased vacancies in October 2009 (27.7 percent increased, 12.1 percent decreased). This marked a significant increase (17.5 percent) from October 2008, when a net total of 1.9 percent of service companies reported decreases in nonexempt vacancies.

“Wide-scale layoffs across the economy were just beginning to hit at around this time last year, so it is not necessarily surprising that compared to last October, vacancies are now increasing in all four job categories for manufacturing and services,” said Schramm. “However, this could be another indication that employment conditions may be slowly starting to improve.”

The responses in the LINE survey are weighted using the proportion of total employment represented by the respondent’s industry. These weights are calculated using the annual