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.”

Minimum wage to rise Friday

On Friday, the last of a three-phase increase in the federal minimum wage goes into effect. The base pay level of $7.25 an hour replaces Florida’s current minimum wage of $7.21 an hour.

While 4 cents may not seem like a lot to Florida workers, the hike is an 11 percent increase from the $6.55 an hour that was mandated by federal law.

The state’s minimum wage was raised to $7.21 in January from $6.79 in 2008.

The minimum wage applies to all employees who are eligible, and is different for employees who work off of tips.

Florida’s current rate for those in the latter category – $4.19 an hour plus tips – will increase to $4.23 on Friday.

State law requires the Florida Agency for Workforce Innovation to calculate a new minimum wage each year and publish it on Jan. 1.

Employees who are entitled to receive minimum wage, but are not paid the minimum wage, can sue their employers for violating Florida's minimum wage law.

Global Relocation Trends Favor Older Workers

6/29/2009 By Bill Leonard

An uncertain global economy has reduced the number of international assignments for employees of multinational corporations, according to a recent report released by Brookfield Global Relocation Services (Brookfield GRS).

Two-thirds of survey respondents from 180 multinational companies reported that their organizations planned to send fewer employees on international assignments in 2009 or, at most, maintain their current levels of international assignments. Nearly 70 percent of the respondents also reported that they are cutting the costs of international assignments as a direct response to global economic conditions—compared to 58 percent of the respondents in 2008.

“This year’s survey makes clear that many multinational companies have adopted a cautious wait-and-see approach, as concerns over the global economy continue to cast a shadow over their business,” said Rick Schwartz, president of Brookfield GRS.

Respondents also reported that the employees assigned to work overseas tend to be older and more experienced workers. The survey results showed that approximately 9 percent of expatriate workers for the responding companies were between the ages of 20 and 29—the lowest percentage for that age group in the annual survey’s 14-year history. According to researchers with Brookfield GRS, employers favor older and more experienced employees because they have proven track records and reduce the risks for turnover and incomplete assignments.

The top challenges businesses face when relocating employees overseas, according to the survey results, were:

Controlling the overall cost of assignments.
Finding suitable candidates.
Controlling policy exceptions.
The survey did find that the number of women sent on international assignments has remained relatively stable for the past two years, and female expatriates represent approximately 20 percent of expatriate employees. The peak percentage for female expatriate employees was 23 percent in 2005, according to survey’s statistics.

Brookfield GRS researchers also examined some of the top reasons for assignment failures and reasons for refusing international assignments. Survey participants were asked to rank the top 10 reasons for assignment refusals. “Family concerns” topped the list of reasons followed by “spouse’s career concerns.”

China was ranked as the top relocation destination, followed by the U.S., the United Kingdom, Singapore and Switzerland. In addition, China topped the list for presenting the greatest challenges to international assignments due to the difficulty of locating suitable housing and schools and finding adequate medical care. Chinese immigration rules, tax laws and compliance to local regulations also pose significant challenges to expatriate relocations, the survey found.

Recruitment And Retention Best Practices Built Into Total Compensation Statement Software

Total Rewards Software, Inc., the industry leader in on-demand total compensation statement software has developed a best practice methodology called Critical Success Factor 360. This program combines its on-demand software with all of its best practice modules into a systematic, 360-degree recruitment and retention, communication platform.

"Traditionally, employers have provided total rewards statements to their employees and hoped for the best. They had no visibility into whether employees viewed their statements, what improvements they would like to see, or even if they found value in the statements," said Char Ruppel, VP of Business Development at Total Rewards Software. "With our Critical Success Factor 360 best practice methodology, employers can now promote, educate, track, measure, survey and receive feedback about their total rewards' communication efforts. In addition, the HR department can provide current total compensation data analysis to upper management with our HR Executive Dashboard Module."

Besides the Dashboard Module, the Critical Success Factor 360 suite of modules also includes Candidate, Stock Option, Personalized FAQ, Analytics, and Survey/Feedback.

The on-demand total compensation statement software includes several versions -- Free, Professional and Enterprise Editions. A private-label version called the Agency Edition is also available and designed specifically for providers of employer services such as insurance brokers, third-party administrators and payroll providers.

Where the jobs are: location, location, location

by Donna Rosato

The latest news on unemployment was as grim as expected: More than 5 million people have lost their jobs since the beginning of 2008 and the unemployment rate surged to 8.5% in March, the highest in 25 years, the Bureau of Labor Statistics reported Friday.

It may seem as if no place in the U.S. is untouched by job losses. But another report the BLS released last week reveals that the jobs market, like housing, is local. Every month, the BLS examines unemployment trends in 372 metropolitan regions (known as Metropolitan Statistical Areas or MSAs). The report lags the more well-known Employment Situation report by one month, so the data is from February. But it clearly shows that some places are weathering this recession better than others when it comes to jobs. According to the report, 14 areas posted jobless rates of at least 13%, including Detroit, Michigan and Fresno, California while 20 areas registered rates below 5% in February, including Ames, Iowa, Manhattan, Kansas, Lincoln, Nebraska , Lubbock, Texas and Lafayette, Louisiana.

Harvard economics professor Edward Glaeser says the disparity in unemployment in regions around the U.S. may seem random but it isn’t.  According to Glaeser, some places are able to weather an economic downturn better because of specific characteristics of their local area. Not surprisingly, Glaeser’s research finds a strong correlation between a skilled workforce and lower unemployment.  Currently, 15.1% of high school dropouts are unemployed while just 4.2% of college graduates are out of work. For people with a high school diploma, unemployment is around 9%. The higher the educational level of a metropolitan area, the lower the unemployment rate.

As in past recessions, there’s also a clear link between unemployment and manufacturing. Industries that have been declining for decades like textile, paper and car manufacturing are more likely to layoff masses of workers during a downturn. You can see that relationship at work in the MSA unemployment report, where old industrial cities like Detroit, Waterbury, Ct. and Youngstown, Ohio have double digit jobless rates.

Most interestingly, Glaeser finds that unemployment also is closely correlated with “job sprawl”. In MSAs where jobs are spread out and people have long commutes to work outside a city core, like Los Angeles and Detroit, unemployment is higher.  Meanwhile, unemployment is lowest in areas where jobs are centralized.  According to a Brookings Institute report released today more than 30% of jobs in utilities, finance, insurance and education are located within three miles of downtowns, while at least half of the jobs in manufacturing, construction, and retail are more than 10 miles away from central business districts.

Of course, you can’t always pick where you work. Family ties or a home purchase often keeps you in a particular geographic area. But if you are looking for work and have any flexibility to move, keep a close eye on the monthly MSA report if you want to know where the jobs are. – Donna Rosato

LINE: Employment Expectations at Four-Year Lows

November 2007—18 months ago as of May 2009—was the last month the Leading Indicators of National Employment (LINE) hiring index was positive, according to the Society for Human Resource Management’s latest LINE data. The LINE Report examines four key areas—employers’ hiring expectations, new-hire compensation, difficulty in recruiting top-level talent, and job vacancies. Its findings are based on a monthly survey of HR professionals at more than 500 manufacturing and 500 private service-sector companies. Together, these sectors comprise more than 90 percent of America’s private-sector employment. Employment expectations for May 2009 are at four-year lows for manufacturing and service sectors—down 34.8 percent for manufacturing and 18.1 percent for service—the report found.  “LINE’s employment expectations index has been negative since December 2007, which is the month when federal officials say the recession began,” observed Jennifer Schramm, SHRM’s manager of workplace trends and forecasting. “While employment expectations for May 2009 are still showing a net annual decline, the numbers are not as devastating as they have been over the previous few months,” she told SHRM Online. Hiring expectations for May 2009—while down—are not as severe as in previous months, according to the report. Although the employment expectations index is still down compared to spring of 2008, Schramm added, “more members of the manufacturing and service sectors say they will add to their payrolls in May than have in the past several months, so we will be watching this index closely to see if this trend continues.” April 2009 was the first April in four years that more manufacturers reported an easier time recruiting. There even was less difficulty in recruiting talent among the service sector. “With millions of people seeking work and fewer opportunities that exist, the LINE recruiting difficulty index is not likely to reverse this trend in the near future,” the LINE report states. New-Hire Compensation Wages and benefits packages for new hires in April 2009 also dropped dramatically compared to April 2008 for both sectors. “Although many companies have scuttled hiring plans during the recession and are cutting jobs, many are also turning to wage and benefit cuts in an ongoing effort to control costs,” the report says. In April 2009, a net 2.3 percent of LINE respondents noted they would decrease new-hire compensation in the manufacturing sector—the lowest April response total in LINE’s four-year history. As for the service sector, “the trend of slashing salaries and benefits was even more pronounced” during that same period, according to the LINE report. It found a net total of 12.2 percent of companies reporting reduced wages and benefits packages for new hires in April 2009. The SHRM LINE Report is released at 9 a.m. Eastern time on the third Friday following the conclusion of the week containing the 12th of the month. The SHRM employment expectations index describes the same time period referenced approximately one month later in the Employment Situation Report issued by the U.S. Bureau of Labor Statistics.

 

Sanders: Recession Requires a Responsibility Revolution

4/28/2009

By Theresa Minton-Eversole

LAS VEGAS—There’s only one way to shake off the recessionary doldrums that hold the country in an economic vise grip, according to Tim Sanders, best-selling author and former Yahoo! leadership coach and chief solutions officer.

“When times get tough, people go through their own personal recession. And when attitudes go negative, people and companies must get inspirational,” said Sanders on April 28, 2009, during the opening keynote session of the Society for Human Resource Management (SHRM) Staffing Management Conference & Exposition, being held here through April 30. “The secret to turning the negativity around is to create an emotional compensation plan. You must make yourself emotionally attractive. Companies must make themselves emotionally attractive.”

Psychologists call it the “likeability factor,” Sanders explained. “People who have the likeability factor have the ability to consistently create positive emotional experiences in the lives of other people. And because they do it on such a consistent basis, they get into the positive feedback mode.” They make people feel good about themselves every day, and these folks in turn say, “You’re making a positive difference in the world,” which builds the likeable people back up so they can make that positive difference again the next day.

“Recessions are great equalizers,” he said. They bring out the best in the best people and the worst in the worst, contributing to a scarcity mind-set of defensiveness, negativity and lack of confidence that eventually alters one’s perception of the world.

The Mutterers

Perspective moves from thoughts to words to actions, negative or positive. “So if you want to get your mojo back, your positive perspective must be cultivated.” The way to do that, Sanders said, is to “change your diet and exercise.

“Clean up your diet by getting rid of all the negative reporting, negative people and bad influences in your life,” he said, adding that people can practice being a more positive influence on others by simply focusing more on their e-mail etiquette.

“E-mail is one of the greatest sources of frustration in the workplace, second only to change,” Sanders said, offering suggestions for how to clean it up:

RULE #1: Communicate no bad news through e-mail. “Remember when you used to have to wait for someone to leave the office before you left them a voice mail?”

RULE #2: Stop sending e-mails during nonbusiness hours. “Heavy weekend e-mailers [managers] have three times more regretful turnover than those managers who expect e-mails to stop after business hours. So how do you kick the habit? Just click on ‘File,’ then ‘Offline.’ ”

RULE #3: Think before you “forward.” “Only a third of the people scroll down through an entire e-mail before forwarding to others,” which he said could lead to embarrassment if not career sabotage. “The people who send the most e-mails are the most deleted and the least likely to be read or responded to. So stay relevant.”

RULE #4: Stamp out “Reply to All.” Enough said.

Sanders said there are several attributes that highly likeable people possess, noting that honing these attributes can lead not only to great personal success but also to professional success:

Friendliness: “The only way to sustain this is to be authentic. For example, when you show up for a meeting, show up! Leave the ‘CrackBerry,’ the PDA, the iPod in your office, and be attentive. Turn off your computer screen when someone enters your office in order to give them your undivided attention. And obsess over keeping your word on the little promises you make.” This will show people you truly care about them, he said. “And be grateful, not for things, but for experiences you’ve had, the people who are in your life and your capabilities. Have you ever seen an unhappy grateful person?”

Relevance: The ability to develop a sincere interest in just a few people’s lives will do more for one’s career and life than learning a minimal amount about a whole lot of people, he said.

Empathy: “Every human leaks emotions. Help people understand that their feelings are facts. If you ‘accurately’ determine and understand all the feelings of people in a room, then you’re the best leader in the room.”

And what can companies do to make themselves emotionally attractive to all their stakeholders? Sanders made these suggestions:

“Stop hiring jerks, particularly high-potential jerks. You’ve got time, particularly now, to hire folks who are a good cultural match with the organization.”

Regarding the onboarding process: “Skip the policies and procedures; share how things are done in the organization and the company culture.” And stay engaged even after the new employees’ first days or months. Also, make hiring managers responsible for the continued success of the onboarding process and employees’ training and development by adding these goals to their performance goals.

Companies should promote a culture of continuous learning, work/life balance and wellness, Sanders said, adding that recent research shows that smoking and obesity percentages are rising because of the stresses of the economic downturn on individuals. “Double down on wellness to show employees the company really does care about them.”

Finally, he said, “Institute social compensation. Have your employees make meaning, not just money, in the world. Encourage community service, so that if they go, they’ll not only have to leave their job, they’ll have to leave their life.”

Theresa Minton-Eversole is an editor/manager for SHRM Online.