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Alexandria, Va.—According to new numbers from the Leading Indicator of National Employment (LINE®) report, there will be more job growth in January 2007 than in January 2006, and employers from both the manufacturing and the service sectors revealed no evidence of increasing wage inflation. The findings are reported in the January report of the LINE® index, a collaborative effort between the Society for Human Resource Management (SHRM) and the Rutgers University School of Management and Labor Relations.
This LINE® employment expectations report references the same January period as the report the Bureau of Labor Statistics (BLS) will release on February 2, 2007.
Despite the major decline in overall job vacancies, firms continue to face considerable difficulty in finding highly qualified applicants to fill key positions. Within both the manufacturing and service sectors, recruiting difficulty continues to be a major concern, due to a drop in the large pool of qualified job seekers eager to take open positions. The recruiting difficulty indexes for the manufacturing and service sectors remain at nearly the same level (19.5 percent and 22.3 percent). The LINE "net increasing index" is calculated by taking the percentage increasing minus the percentage decreasing.
The indicator reports on four employment measures: job expectations, job vacancies, new-hire compensation and recruitment difficulty. The LINE® employment expectations index has consistently provided an early indication of the upcoming BLS numbers.
Employment expectations among manufacturing firms declined between December 2006 and January 2007. This dip may be attributed to seasonality, but the January 2007 index (28.2 percent) remains substantially above the level of January 2006 (21.3 percent). Fewer manufacturers plan to shrink their workforces in January 2007 than in January 2006 (11.6 percent versus 16.9 percent). The new-hire compensation index for December 2006 (9.8 percent) is below the level of December 2005 (11.3 percent). The percentage of manufacturers with exempt vacancy reductions rose from 12.0 percent to 22.0 percent. As a result of more firms with vacancy declines, the manufacturing sector nonexempt vacancy index dipped to 0.0 percent. However, the December 2006 recruiting difficulty index (19.5 percent) in manufacturing remains at approximately the same level as in December 2005 (18.7 percent).
Within the service sector, the January 2007 index is essentially unchanged from December 2006 but well above the level of January 2006. Service-sector employment is expected to increase in January 2007. Like manufacturing, the new-hire compensation index for December 2006 is also below the level of December 2005 (10.7 compared with 12.3 percent). The percentage of service-sector firms reporting exempt vacancy reductions rose from 9.8 percent in December 2005 to nearly 17 percent this month. The decline in the nonexempt vacancy index was the result of fewer firms reporting employment vacancy growth compared to a year ago. This indicates that vacancy growth has slowed and fewer firms are increasing the wage and benefit packages offered to new hires. A boost in new-hire compensation is less needed in order to attract more applicants. The overall number of job vacancies is declining. The recruiting difficulty index has climbed from 16.9 in December 2005 to 22.3 in December 2006.
The LINE® index is an economic indicator that identifies early economic trends and changes in the national job market by surveying human resource (HR) executives at manufacturing and service-sector firms. The indicator is released at 8:30 am ET on the fourth Tuesday of each month.
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