January LINE: Job Market Recovery Is Not Speeding Up 

 

The latest Society for Human Resource Management (SHRM) Leading Indicators of National Employment (LINE) report confirms what many economists have feared: Even when positive signs are found in the employment picture, there is little reason for optimism when it comes to sustained job growth early in the new year.

The LINE report for January 2011, available at www.shrm.org/line, shows that the percentages of American companies that report that they are hiring in January are at three-year highs in the manufacturing and service sectors. And layoffs are at a four-year low.

But considering how far the job market has fallen, those statistics are little comfort to those who follow the trends.

“Though comparisons to the same time last year are positive, the pace of improvement has not accelerated in the last several months,” said Jennifer Schramm, GPHR, SHRM’s manager of workplace trends and forecasting.

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

The latest national unemployment report is scheduled to be released by the U.S. Bureau of Labor Statistics on Jan. 7, 2011. The December nationwide figure stood at 9.8 percent. But that metric tells only part of the story. Roughly 15 million Americans are out of work; some have given up looking for employment. Many people who are on payrolls are underemployed.

The jobs slump is so deep and so protracted that the government is changing how it measures the long-term unemployed. In addition to checking a box saying they have been jobless for at least 99 weeks, Americans will now have the option of checking a box admitting to being unemployed for at least 260 weeks.

And while organizations such as Manpower and CareerBuilder forecast employment gains in the U.S. during 2011, no one is expecting a quick and dramatic turnaround. Even Federal Reserve Chairman Ben Bernanke told “60 Minutes” on Dec. 5, 2010, that “at the rate we are going, it could be four, five years before we are back to a more normal unemployment rate.”

News media headlines add to the confusion, alternately reporting highly positive developments one day—such as increases to payrolls—and negative events—such as increases in initial filings for unemployment benefits.

The new LINE report documents that no dramatic swings in the overall labor market picture can be expected overnight.

It reveals that wages and benefit packages are inching up in the manufacturing and services sectors. However, it shows that job openings for exempt positions fell in both sectors in December 2010 compared with December 2009. Vacancies for hourly jobs increased in both sectors in December 2010 compared with the previous year.

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

January Employment Expectations

January 2011 represents the 15th consecutive month that hiring will increase in the manufacturing and services sectors on an annual basis.

The manufacturing hiring index will improve in January on a year-over-year basis by a net of 12.0 points (a net of 29.6 percent of companies will hire in January, compared with 17.6 percent that added jobs a year earlier). The service hiring index will rise in January by a net of 10.2 points (a net of 21.5 percent will add jobs, compared with a net of 11.3 percent that added jobs a year earlier). Recent year-over-year increases in hiring are also a reflection of poor job market conditions a year earlier, and the pace has not accelerated in the past several months.

Nonetheless, the net number of manufacturing companies hiring in January 2011 (40.4 percent) is at a three-year high, and the layoff rate (10.8 percent) is at a four-year low. In services, the net of 30.7 percent of companies hiring is also at a three-year high for January, and the layoff rate (9.2 percent) is at a four-year low.

Recruiting Difficulty

The LINE report’s recruiting difficulty index indicates how difficult it is for organizations to find people to fill the positions of greatest strategic importance.

Even though only a small percentage of respondents reported having a tougher time finding top talent in December 2010, the level of difficulty increased compared with a year earlier. In the manufacturing sector, a net of 8.7 percent of respondents had more difficulty with recruiting in December. This is a modest net increase of 13.3 points from December 2009, when a net of 4.6 percent reported less difficulty with recruiting.

In the service sector, a net of 3.3 percent of HR professionals had more difficulty recruiting in December 2010. This is an increase of 6.8 points from December 2009, when a net total of 3.5 percent of HR professionals had less difficulty with finding top talent.

“Despite the continuing high rate of unemployment, HR professionals in both sectors are reporting more difficulty finding the right people for their organizations’ key vacant positions,” said Schramm. “Many of our members have told us that it is getting very difficult to fill some jobs. Even though they have a large number of applicants, finding those with the right skills and experience is growing more challenging.”

New-Hire Compensation

In the manufacturing sector, a net total of 2.9 percent of respondents reported increasing new-hire compensation in December 2010 (4.1 percent increased, 1.2 percent decreased). That is an increase of 3.0 points from December 2009. In the service sector, a net total of 1.8 percent of companies increased new-hire compensation in December (2.6 percent increased, 0.8 percent decreased). That represents a 1.1-point increase from December 2009, when a net of 0.7 percent of service companies increased new-hire compensation.

“The low rates of change in both sectors indicate that most organizations are keeping new-hire compensation rates flat and that many people landing new jobs are continuing to accept lower wages and benefits as the labor market remains weak,” the LINE report states.

Job Vacancies

In the manufacturing sector, a net total of 11.9 percent of respondents reported increases in exempt vacancies in December (21.7 percent reported increases, 9.8 percent reported decreases). This represents a 0.3-point decrease from December 2009 and the first time in 17 months that exempt vacancies are lower than those of the same month the previous year.

In the service sector, a net total of 2.4 percent of respondents reported increases in exempt vacancies in December (14.9 percent reported increases, 12.5 percent reported decreases). That is a 2.6-point decrease from December 2009 and the second consecutive month that exempt vacancies are lower than the previous year.

Vacancies for hourly jobs increased in both sectors in December 2010.

For the complete LINE report, visit www.shrm.org/line.

Steve Bates is manager of online editorial content for SHRM. He can be reached at steve.bates@shrm.org.