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LINE Report: Softer Labor Market in June
 

By Kathy Gurchiek  5/27/2008
 

The labor market is much weaker in June 2008 than it was a year ago and will continue to be soft, with a sharp decline in employment expectations in manufacturing and service sector jobs, according to the latest Society for Human Resource Management (SHRM)/Rutgers LINE survey report.

The Leading Indicators of National Employment (LINE) report shows that for June 2008:

  • Far fewer hires likely will be made, based on a substantial drop in employment expectations for the service sector (down 28.2 points) and manufacturing (down 11.1 points) compared to one year ago.
  • Mixed compensation growth is expected for new hires. The much larger service sector fell significantly compared to May 2007; manufacturing will increase modestly in new hire compensation.
  • The difficulty of recruiting lessened substantially for manufacturing and service sectors compared to May 2007 levels.

“The biggest difference between the manufacturing and service sectors is in new-hire compensation,” says Jennifer Schramm, manager of Workplace Trends and Forecasting for SHRM.

She pointed to a drop from a net index of 17.7 in May 2007 to 5.9 in May 2008 for new-hire compensation in that sector. This means that employers don’t feel much pressure to raise wage rates for their new hires, she said.

The other indicators—employers’ employment expectations and difficulty recruiting highly qualified applicants to fill positions of great strategic importance to their organizations—suggest more similarities than differences between the manufacturing and service sectors, Schramm said.

Difficulty recruiting “A-level” talent is lower for both sectors compared to a year ago, the report found.

Employment Expectations

The service sector employment showed a net index increase of 61.2, compared to a projected increase of 33.0 in June 2008.

The manufacturing employment expectations index dropped from 46.8 in June 2007 to 35.7 for June 2008.

Exempt employment—positions that are not covered by overtime provisions of the Fair Labor Standards Act—typically falls by a smaller percentage than nonexempt positions when the economy is in a downturn and increases by a smaller percentage when the economy rises, according to Schramm.

The index of exempt vacancies in manufacturing fell from 23.5 in May 2007 to 14.7 in May 2008 but rose for the service sector from -0.2 in May 2007 to 6.4 in May 2008.

The index of nonexempt vacancies rose for both sectors in May 2008.

Manufacturing’s nonexempt vacancy index rose slightly from 14.0 in May 2007 to 16.3 in May 2008. The service sector’s nonexempt vacancy index jumped from 6.8 in May 2007 to 22.3 in May 2008.

According to the LINE report, the rise in the service sector’s exempt and nonexempt index levels “reflects both an increase in the percentage of HR professionals reporting increasing vacancies and a drop in the percentage of those reporting decreasing vacancies.”

New-Hire Compensation

The index for compensation, which includes wages and benefits, for new hires in manufacturing rose from 9.8 in May 2007 to 11.4 in May 2008. However, in the service sector the index was only about one-third of what it was a year ago—17.7 in May 2007 vs. 5.9 in May 2008.

The LINE report indicates that an index of new-hire compensation should provide an earlier signal of changing economic conditions, the report notes.

“Overall, employers don’t seem to be under as much pressure to raise wage rates for their new hires, said Schramm.

Recruiting

Employers had a less difficult time filling positions with great strategic importance than a year ago.

According to the LINE report, “While the percentage of manufacturing firms that believe recruiting is getting more difficult remains larger than the percentage of firms that think it is getting easier, the May 2008 recruiting difficulty index for manufacturing dropped substantially,” from 20.8 in May 2007 to 7.5 in May 2008.

“Job seekers are out there looking, and it’s easier for employers to find the people that they need” in terms of “A-level” talent, Schramm told SHRM Online.

The overall message from the latest LINE Report, she said, is that employer expectations for the manufacturing and service sectors “are down pretty substantially and the recruiting difficulty has also dropped.”

The LINE report, released more than a month ahead of the Bureau of Labor Statistics’ (BLS) Employment Situation Report for the same period, identifies early trends and changes in the national job market. It is produced in collaboration with SHRM and the Rutgers University School of Management and Labor Relations. Data for the report is collected through a monthly survey of HR executives at more than 500 manufacturing and 500 service sector organizations.

Kathy Gurchiek is associate editor for HR News. She can be reached at kgurchiek@shrm.org.

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