Labor Market Has Tightened, but Opportunities Still Exist

By Joseph Coombs Oct 6, 2016
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New research from the Society for Human Resource Management (SHRM) suggests that the U.S. labor market has cooled off a bit in 2016, but economic conditions and hiring rates remain quite favorable for job seekers.

SHRM's Jobs Outlook Survey, which examines hiring trends across a 12-month spectrum, revealed that HR professionals' confidence in the labor market has declined compared with a year ago. However, 58 percent of respondents still had a favorable view of the job market and expected payrolls to expand in the latter half of 2016.

Respondents were also positive about their organizations' financial future. Eighty-three percent of HR professionals had positive views of their employers' fiscal health (51 percent classified it as "good," and another 32 percent described it as "excellent"). And 62 percent said they expected their organizations' finances to improve in the latter half of 2016.

Meanwhile, SHRM's Leading Indicators of National Employment (LINE) report for October 2016 showed that hiring rates in manufacturing and services would drop in October compared with a year ago. But other data from the report indicated that HR professionals would like to expand payrolls further if they could.

A net of more than one-third of respondents in manufacturing (38.9 percent) and services (37.3 percent) had increased recruiting difficulty in September compared with the previous year, which means many HR professionals are still struggling to find qualified candidates for key positions at their employers.

By at least one measure, the U.S. labor market has reversed most of the damage caused by the Great Recession of 2007-09. In an analysis titled "Job openings, hires and separations return to prerecession levels in 2015," U.S. Bureau of Labor Statistics (BLS) economist Ainslie McLeod writes that the monthly average for job openings during 2015 was 5.3 million, not far off the record high of 5.8 million reached in July last year.

Hires, with an average level of 5.1 million, "exceeded their November 2007 prerecession level for the last three months of the year," McLeod said, and, in a "reversal of historical patterns, job openings exceeded hires for nine months in 2015.".

Perhaps the most encouraging trend from McLeod's report centers on separations, which are classified as quits, layoffs, discharges and other forms of payroll reduction. Total separations approached their November 2007 prerecession level throughout the year and exceeded that level in December 2015, according to McLeod's report.

This was not mainly due to increases in layoffs but to a boost in job seekers' confidence—the growth in total separations was pushed by a large increase in quits, which were up 11.5 percent in 2015. Quits averaged 2.8 million over 2015 and returned to prerecession levels for four of the last five months of the year, McLeod said.

"This increase in jobs and worker flows is likely indicative of growing confidence on the part of employers and workers, with employers becoming more willing to hire and workers having sufficient incentives to leave their current positions," McLeod said in the report.

Despite all the good news, however, there are some troubling numbers in the federal data that should get the attention of HR professionals, said Jeff Rogers, CEO of Job Hunter Pro, a San Diego-based outplacement services firm.

"As good as the job market and economic conditions may appear, we are still seeing around 1.6 million layoffs per month since the beginning of 2016," Rogers said. "Despite substantial drops in outplacement cost, many employers still don't offer support to their separating employees.

"This is surprising since employers can easily recoup the cost of outplacement through savings in unemployment compensation, workers' compensation, increased productivity, brand protection and mitigation of legal expense, for example. Certainly, the employment picture is bright these days, but our enthusiasm must be tempered by some of the underlying issues we face and need to address as HR professionals."

Joseph Coombs is a senior analyst for workforce trends at SHRM.

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