LINE: Hiring in Manufacturing, Service Sectors to Hit High Mark in May

By SHRM Online staff May 1, 2014

Hiring will reach a four-year high in the manufacturing sector and a three-year high in the service sector in May 2014, according to the Society for Human Resource Management’s (SHRM) Leading Indicators of National Employment (LINE) survey released May 1. Layoffs will continue to decline in both sectors compared to a year ago.

The report examines four key areas: employers’ hiring expectations, new-hire compensation, difficulty in recruiting top-level people and job vacancies. SHRM collects LINE data through a monthly survey of HR executives at more than 500 manufacturing and more than 500 service-sector firms—together, these sectors employ more than 90 percent of the nation’s private-sector workers.

Indices for the report are not seasonally adjusted. Survey responses are weighted using the proportion of total employment represented by the respondent’s industry and calculated using the annual benchmark revisions that the U.S. Bureau of Labor Statistics (BLS) released Feb. 11, 2011.

Employment Expectations, Job Vacancies

In May, the hiring rate is expected to climb 10 percentage points for manufacturing and nearly 2 percentage points (1.8) for the service sector compared with the same time last year. Slightly more than one-half (52.9 percent) of manufacturers are expected to add jobs in May, and 4.1 percent will cut jobs. More than one-third (38.9 percent) of service-sector companies are expected to add jobs in May, and 7.7 percent will cut jobs.

In April, for the fifth consecutive month, fewer manufacturers reported an increase in openings for salaried jobs compared with the previous year, dropping 15.2 percentage points compared with April 2013. However, the number of companies with an increase in vacant exempt positions rose by 10.3 points in the service sector since a year ago.

Both sectors, for the third consecutive month, reported fewer increases in hourly job openings, compared to a year ago. The manufacturing index declined by nearly five percentage points (4.9), and the service index dropped 4.2 percentage points compared to April 2013.

“Monthly nonexempt openings have not followed a specific trend lately when compared with the previous year,” wrote Jennifer Schramm, GPHR, SHRM’s manager of workforce trends, in the LINE report. “HR professionals in both sectors have generally reported having increases in job openings within the month of each LINE survey. For every month since September 2009—shortly after the end of the Great Recession—the manufacturing and service sectors have reported a net increase for nonexempt openings.”

Recruiting Difficulty

Many HR professionals continue to report having difficulty landing key candidates for positions. This challenge reached a four-year high in April 2014 for both sectors, increasing by nearly 5 percentage points (4.9) from April 2013 for manufacturing and jumping 6.5 percentage points for the service sector.

In an April 18, 2014, article, the Associated Press cited U.S. Department of Labor figures that showed unemployment dropped in 21 states, rose in 17 and remained the same in 12; hiring rose in 34 states and dropped in 16 states.

In developed countries such as the United States, the service sector’s employment has been gradually moving “on an upward curve … of more than 5 percent between 2000 and 2009,” according to What’s Next: Future Global Trends Affecting Your Organization, Evolution of Work and the Worker, a report that the SHRM Foundation and the Economist Intelligence Unit released earlier this year. That report also cites BLS predictions that employment will grow fastest in occupations where automation is difficult, specifically within health care, construction, and science, technology, engineering and mathematics (STEM) occupations.

New-Hire Compensation

Overall, most employers in both sectors are keeping pay for new hires flat, according to the LINE report. A net of 4.5 percent of manufacturers reported increases in compensation for new hires in April 2014—that’s down by 3.5 percentage points from April 2013. A net of 6.6 percent of service-sector companies increased new-hire compensation in April; that’s down 1.3 percentage points from April 2013.

A large pool of available workers and high unemployment allowed companies to keep wages and benefits down during the Great Recession, the LINE report points out. SHRM researchers predict that pay for new hires will rise if hiring rates improve significantly.

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