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Job Market’s Slow-Growth Scenario Will Continue in December 2011
 

By Theresa Minton-Eversole  12/1/2011
 


It doesn’t appear that the grip of a recessionary economy will be loosening during the 2011 holiday season. As was the case in November 2011, hiring activity in December 2011 will decrease and job cuts will rise in the manufacturing and service sectors compared with a year ago, according to the latest Society for Human Resource Management (SHRM) Leading Indicators of National Employment (LINE) survey, released Dec. 1, 2011.

The SHRM LINE data for employers’ hiring expectations, job vacancies, difficulty in recruiting top-level talent and new-hire compensation are collected through a monthly survey of human resource executives at more than 500 manufacturing and 500 service-sector firms. Together, these two sectors employ more than 90 percent of the nation’s private-sector workers.

“For the second consecutive month, HR professionals are reporting decreased hiring and more job cuts compared with a year ago,” said Jennifer Schramm, GPHR, manager of SHRM’s workplace trends and forecasting. “But at the same time, recruiting difficulty for jobs of strategic importance continues to grow more challenging. This suggests that there may be skills shortages emerging in some industries.” 

Employment Expectations

Manufacturing

Service

In December 2011, hiring will drop slightly in manufacturing and fall moderately in services compared with December 2010.

-4.9

-9.4

Recruiting Difficulty

In November 2011, the index for recruiting difficulty rose slightly in both sectors compared with November 2010.

+5.2

+2.7

New-Hire Compensation

In November 2011, the rate of increase for new-hire compensation rose marginally in both sectors compared with November 2010.

+3.0

+0.7

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

Employment Expectations

The LINE employment expectations index provides an early indication of the U.S. Bureau of Labor Statistics (BLS) Employment Situation Report findings. According to the most recent LINE data, the manufacturing hiring index will fall in December 2011 on a year-over-year basis by a net of 4.9 points (a net of 29.1 percent of companies will hire in December 2011, compared with a net of 34.0 percent that added jobs in December 2010). Service-sector hiring will decrease in December 2011 by a net of 9.4 points (a net of 21.8 percent will add jobs, compared with a net of 31.2 percent that added jobs a year ago).

The LINE results for December 2011 reflect a trend of subpar growth in job creation in accord with federal government employment data. For the 12 months ending October 2011, payroll employment increased by an average of 125,000 jobs per month, according to the BLS. Many economists say twice that many new jobs are needed each month to bring down the unemployment rate steadily.

On the surface, these data appear to conflict with a recent SHRM poll addressing the continuing impact of the recession. Results from that poll, released Nov. 22, 2011, appear to support indications that employers are looking to hire full-time staff again. Nearly three-quarters (73 percent) of HR professionals who responded to the poll reported that their organizations were hiring full-time regular employees.

Schramm addresses the distinction: “Keep in mind that LINE’s net employment expectations number is still positive. So it’s not that companies aren’t adding jobs, they’re just not adding them at the level they were at this time last year. The recession impact poll does suggest, however, that employment is picking up in at least some areas.”

The recession poll collected results from a broader base of employers, and its respondent group differs from a typical LINE survey.

In fact, the recession impact poll found that more than 60 percent of organizations with more than 500 employees were hiring full-time employees compared to less than 50 percent of businesses with fewer than 500 employees.

Exempt, Nonexempt Position Vacancies

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. Overall, December 2011 LINE data show that salaried job openings fell in manufacturing but rose slightly in services in November 2011 compared with November 2010.

In the manufacturing sector, a net total of 7.4 percent of respondents reported increases in exempt vacancies in November 2011 (19.0 percent reported increases, 11.6 percent reported decreases). This represents a 10.3-point decline from November 2010. In the service sector, a net total of 1.0 percent of respondents reported decreases in exempt vacancies in November 2011 (10.2 percent reported increases, 11.2 percent reported decreases). That is a 3.1-point increase from November 2010.

Typically, exempt employment declines by a smaller percentage than nonexempt employment during economic downturns and increases by a smaller percentage during economic expansions.

In contrast to exempt employment, nonexempt employment typically decreases by a greater percentage during economic downturns and increases by a larger percentage during economic expansions. The December 2011 LINE data show that vacancies for hourly jobs fell in both sectors in November 2011 compared with November 2010.

A net total of 11.1 percent of manufacturing respondents reported that nonexempt vacancies increased in November 2011 (24.7 percent increased, 13.6 percent decreased). This represents a 7.6-point decrease from November 2010. For nonexempt service positions, a net total of 7.4 percent of respondents reported increased vacancies in November 2011 (14.9 percent increased, 7.5 percent decreased). This marked an 8.6-point decrease from November 2010.

The decline in nonexempt openings in both sectors could be attributable to decreased demand, but it also reflects the fact that some companies are getting more production out of existing employees, rather than committing to new hires in a significant way. For example, according to SHRM’s Job Outlook Survey for the fourth quarter of 2011, 16 percent of respondents expected their hourly employees to work longer hours during the last three months of 2011 compared with the third quarter.

Recruiting Difficulty

A November 2011 SHRM survey found that 52 percent of HR professionals are having trouble finding properly skilled workers for job openings at their companies. 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. With the exception of March 2011, LINE’s recruiting difficulty index has risen on an annual basis in both sectors for every month since December 2009.

A net of 13.5 percent of manufacturing respondents reported that they had more difficulty with recruiting in November 2011. This is a slight net increase of 5.2 points from November 2010, and the highest net of recruiting difficulty in four years in the month of November.

A net of 0.3 percent of service-sector HR professionals reported that they had more difficulty recruiting in November 2011, an increase of 2.7 points from November 2010 and also the highest net for November in four years. The recruiting difficulty data suggest that the labor market is suffering partially from structural issues along with decreased demand. Essentially, the skills available in the labor force do not match those needed for open positions.

New-Hire Compensation

While past LINE data and BLS statistics document that most organizations are keeping compensation rates flat, LINE data for November 2011 reveal that—for the 14th consecutive month—the rate of increase for new employees’ wages and benefits is rising, albeit slightly.

In the manufacturing sector, a net total of 6.0 percent of respondents reported increasing new-hire compensation in November 2011 (6.2 percent increased, 0.2 percent decreased). That is an increase of 3.0 points from November 2010. In the service sector, a net total of 9.9 percent of companies increased new-hire compensation in November 2011, representing a 0.7-point increase from November 2010.

With the exception of September 2010, the rate of new-hire compensation has risen on an annual basis in both sectors for every month since February 2010.

“Recruiting difficulty is probably one reason we are seeing a slight increase in new-hire compensation,” Schramm said.

This LINE employment expectations index describes the same December time period that the BLS will report on Jan. 6, 2012. The LINE report has tracked manufacturing-sector hiring trends since 2004 and service-sector trends since 2005.

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

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