LINE Confirms that Job Recovery Will Be Slow

12/4/2009

By Theresa Minton-Eversole

December hiring in manufacturing and services will surpass levels reached one year ago, according to the December 2009 Leading Indicators of National Employment (LINE) survey released Dec. 4, 2009, by the Society for Human Resource Management (SHRM). But the positive signs are less a nod to a long-awaited economic recovery than they are a reflection of how poor the job market conditions were in 2008.

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. Together these sectors employ more than 90 percent of the nation’s private-sector workers.

Employment Expectations, Job Vacancies Increase

The December employment expectations index is positive in both sectors. In the manufacturing sector, a net total of 10.7 percent of respondents will add jobs in December (28.2 percent expect to add jobs, 17.5 percent will eliminate them), the sixth straight month in 2009 that hiring will exceed firing in manufacturing. In the service sector, a net total of 18.8 percent of companies will add jobs in December 2009 (28.0 percent expect to hire, 9.2 percent will cut jobs), the eighth straight month that the hiring rate will exceed the layoff rate in that sector in 2009.

Employment Expectations	Manufacturing	Service
Hiring will surpass layoffs in December in manufacturing and services, and the activity is also ahead of December 2008’s pace.	+21.6	+27.9
Recruiting Difficulty	Manufacturing	Service
In November, manufacturers had slightly less recruiting difficulty, while the service sector had increased difficulty landing top talent compared with a year ago.	-1.4	+10.7
New-Hire Compensation	Manufacturing	Service
For the 14th straight month, the rate of increase for new-hire compensation dropped in both sectors in November.	-1.2	-1.7

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

A net total of 2.5 percent of respondents in the manufacturing sector also reported increases in exempt vacancies in November 2009 (16.1 percent reported increases, 13.6 percent reported decreases). This difference of 14.1 is an increase from November 2008 and is the fourth consecutive month that net exempt vacancies are higher than those of the same month in 2008. Likewise, a net total of 1.0 percent of respondents in the service sector reported increases in exempt vacancies in November (11.8 percent reported increases, 10.8 percent reported decreases). This is also the fourth consecutive month that exempt vacancies in services are higher than those of the same month in 2008.

A net total of 3.3 percent of manufacturing respondents reported that nonexempt vacancies increased in November 2009 (16.0 percent increased, 12.7 percent decreased). This represents a 22.1 point increase from November 2008 and could suggest that work is slowly being ramped up once again at some companies. Although the gains were small, the Federal Reserve reported that industrial production rose 0.1 percent in October 2009 and 0.7 percent in September 2009.

For nonexempt service positions, a net total of 5.2 percent reported increased vacancies in November 2009 (16.9 percent increased, 11.7 percent decreased). This also marked a significant increase from November 2008, when a net total of 16.0 percent of service companies reported decreases in nonexempt vacancies.

However, these large gains aren’t as good as they sound. “For the second consecutive month hiring expectations in manufacturing and services surpass levels of a year ago, but this may be more of a reflection of the very low hiring levels in the fall of 2008 rather than any significant return to health for the current job market,” said Jennifer Schramm, SHRM’s manager of workplace trends and forecasting.

The latest Conference Board Employment Trends Index tells a similar tale. Published Nov. 9, 2009, the index increased for the second consecutive month and was up 0.7 percent from the revised September 2009 figure. But the index is still down 13.2 percent from the same period in 2008. The increase in the November 2009 index was driven by positive contributions from four out of the eight tracked indicators, including initial claims for unemployment insurance, the number of temporary employees, industrial production and real manufacturing and trade sales.

"While layoffs have certainly declined in recent months, we still expect to see employers adding hours to their existing workforce before hiring will strongly increase," said Gad Levanon, senior economist at The Conference Board, in a statement regarding the organization’s November 2009 index results.

New-Hire Compensation

LINE shows that new-hire compensation is still down, though, because of the continuing high rate of unemployment and large pool of job seekers in the market. “The year-over-year comparisons of the rate of increase for new-hire compensation is still falling, another sign that overall the job market remains weak,” noted Schramm.

In the manufacturing sector, a net total of 1.1 percent of respondents said they would increase new-hire compensation in November 2009 (2.3 percent increased, 1.2 percent decreased). That is the lowest November response total in five years for manufacturers reporting increases to new-hire compensation.

In the service sector, a net total of 1.5 percent of companies raised new-hire compensation in November 2009 (2.8 percent increased, 1.3 percent decreased).

“Even after months of decline in the LINE new-hire compensation index, there continues to be little pressure on employers to ramp up compensation packages for new hires, indicating that there is still a large pool of job seekers willing to accept lower offers,” said Schramm.