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LINE: Softening Labor Market Now Recurring Trend

By Aliah D. Wright  4/22/2008
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Far fewer people will get jobs in May 2008 as employment expectations for the month in the manufacturing and service sectors are much weaker than they were in May 2007, according to the latest SHRM/Rutgers Leading Indicator of National Employment (LINE) survey report, released April 22, 2008.

Released five weeks before the Bureau of Labor Statistics’ (BLS) Employment Situation Report that covers the same period, May’s LINE report shows that the recruiting difficulty index for the service sector is at the lowest April level since the Society for Human Resource Management (SHRM) and Rutgers began tracking it in 2005.

“We have seen a trend over the past few months of lower employment expectations compared to the same time in previous years,” said Jennifer Schramm, SHRM manager of workplace trends and forecasting. “This may be why we have also been seeing some easing up of recruiting difficulty. Companies seem to be finding it somewhat easier to find the people they need to fill the vacancies that they do have open.”

In the service sector, the recruiting difficulty index is at its lowest level in years. The April 2008 recruiting difficulty index for manufacturing dropped considerably from April 2007 (6.3 compared with 18.3). The recruiting difficulty index for the service sector fell over the same time period (-10.5 compared with 16.4), and more firms reported that recruiting difficulty had decreased (20.9 percent) rather than increased (10.4 percent).

Employment Prospect Drop

Within the manufacturing sector, the employment expectation index dropped considerably from 43.2 in May 2007 to 30.0 in May 2008. May 2007 was a month in which manufacturing jobs went down by 31,000 positions on a seasonally adjusted basis. On a not seasonally adjusted basis, those jobs increased by 27,000 in May of 2007.

And in the service sector, the index dropped even more dramatically from May 2007 to May 2008, 52.0 percent to 35.5 percent, respectively. According to the Bureau of Labor Statistics report released on Feb. 1, 2008, January service-sector employment had fallen on a not seasonally adjusted basis, by the largest amount in the past 10 years. March’s BLS report reveals that the number of unemployed persons increased by 434,000 to 7.8 million in March. Since March 2007, the number of unemployed persons has increased by 1.1 million.

Compensation Growth Slows

Compensation, or wages and benefits, is apt to increase during periods of economic growth and decline with the softening of labor market demand. These cyclical changes usually reveal themselves in the compensation tendered to new hires.

Within the manufacturing sector, the new-hire compensation index slipped from 10.0 percent in April 2007 to 7.8 percent in April 2008. Within the service sector, the new-hire compensation index is slightly lower than it was a year ago (12.6 in April 2008 compared with 13.0 in April 2007).

The SHRM/Rutgers LINE data are collected through a monthly survey of human resource executives at more than 500 manufacturing and 500 service-sector firms. The LINE indices are not seasonally adjusted, so readers are encouraged to take seasonality into consideration by comparing the current month’s results with comparable LINE indices for the same month in the previous year.

Aliah D. Wright is an online editor/manager for SHRM Online.

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