Job creation will continue in the U.S. manufacturing and service sectors in May 2012, though less robustly than a year earlier. Meanwhile, recruiting difficulty, which had been rising in the first months of 2012, appears to be leveling off, according to the latest Society for Human Resource Management (SHRM) Leading Indicators of National Employment (LINE) survey report.
Service-sector hiring is improving more slowly than manufacturing; a net of just over 30 percent of service businesses are hiring in May 2012 compared with a net of just over 40 percent of manufacturers. Both sectors could experience somewhat slower increases in new-hire compensation based on LINE results for April 2012 compared with April 2011.
The LINE report examines four key areas: employers’ hiring expectations, new-hire compensation, difficulty in recruiting top-level talent and job vacancies. It is based on a monthly survey of private-sector human resource professionals at more than 500 manufacturing and 500 service-sector companies. Together, these sectors employ more than 90 percent of the nation’s private-sector workers.
“Overall hiring expectations continue to be fairly positive,” said Jennifer Schramm, GPHR, SHRM’s manager of workplace trends and forecasting.
Still, employers can expect a bumpy ride on the road to recovery. Not all industries are improving. For example, retail trade lost an estimated 34,000 jobs in March 2012. Skills shortages continue to make it difficult to find the right applicants for some jobs. The U.S. economy—and the employment picture—will continue to be buffeted by domestic and international influences. Headlines will suggest an upbeat job market one day, a beat-up one the next. Ironically, an improving job picture might encourage more unemployed people to re-enter the job market, which could result in an increase in the official unemployment rate.
Source: SHRM Leading Indicators of National Employment (LINE), shrm.org/line
Many factors will influence the economy and job market during 2012. Among them:
- The global economy. The Euro crisis, shocks to the oil market and other factors beyond most employers’ control will impact American businesses’ bottom lines.
- Demographic trends. Young people might start moving out of relatives’ homes; Baby Boomers might decide to give up full-time work; there are already signs that American consumers are paying off some of their debts.
- The housing market. If it does bottom out, low mortgage rates might encourage newly hired or rehired Americans to buy.
- Election year politics. If the presidential campaign becomes a referendum on the economy in general and jobs in particular, candidates and the news media will magnify reports of gains and setbacks, potentially adding to employers’ unease and unwillingness to commit to full-time hires.
- Government actions. This might be one of the biggest wild cards. While no big surprises are expected from the Federal Reserve Board, another Washington showdown is looming over the U.S. economy. Large federal tax cuts and spending reductions are scheduled to expire on Dec. 31, 2012, unless Congress acts. It’s possible that a deal to modify or delay some of the major changes might happen, but probably not until after the Nov. 6 elections, which might provide yet another reason for already-cautious employers to resist hiring until the picture becomes clearer.
So, what’s an HR professional to do? Is the job market as fickle as the weather?
Actually, the two might even be related. A few economists have suggested that the mild weather over the winter threw off the federal government’s seasonal adjustment calculations, causing it to underestimate the number of jobs created in March 2012.
For the short term, at least, slow employment growth seems to be the word from the HR professionals who provide the data for SHRM’s LINE report. When a company has a clear need to fill a position and doesn’t expect to turn right around and lay off workers, it will probably take on staff.
Employment Expectations for May
A net of 40.5 percent of manufacturers will add jobs in May 2012 (46.6 percent will hire, 6.1 percent will cut jobs), according to the LINE report. The sector’s hiring index will fall in May on a year-over-year basis by a net of 3.8 points. A net of 30.4 percent of service-sector companies will add jobs in May (35.5 percent will conduct hiring, 5.1 percent will trim payrolls), and the service hiring index will fall by 17.1 points compared with a year earlier. The layoff rate in manufacturing will fall in May compared with 2011; service-sector companies will cut jobs at a slightly higher rate than that of May 2011.
The LINE results for May 2012 reflect a continuing trend of overall steady job growth, in accord with recent federal data. March 2012 data from the U.S. Bureau of Labor Statistics showed that 37,000 manufacturing jobs were added during the month. Several industries related to the service sector also posted employment gains for the month, but other segments of that industry suffered losses.
In April 2012, difficulty in recruiting top-level candidates was nearly unchanged from a year earlier. LINE’s recruiting difficulty index measures how difficult it is for firms to recruit candidates to fill the positions of greatest strategic importance to their companies.
A net of 16.1 percent of manufacturing respondents had more difficulty with recruiting in April 2012. This is an increase of 1.6 points from April 2011 and the highest net of recruiting difficulty in four years in April. A net of 1.7 percent of service-sector HR professionals had less difficulty recruiting in April, a decrease of 2.8 points from a year earlier. The recruiting difficulty data suggest that, particularly in the manufacturing industry, the labor market is suffering partially from structural issues.
“While overall recruiting difficulty has been increasing in 2012, in April this indicator appeared to stabilize, showing very little change from one year ago,” said Schramm.
A November 2011 SHRM survey found that 52 percent of HR professionals are having trouble finding properly skilled workers for job openings at their companies. A December 2011 SHRM study showed that 24 percent of companies have hired workers from outside the United States for staff positions that were deemed difficult to fill.
In April 2012, fewer companies increased compensation for new hires compared with a year earlier. During the recession, a high rate of unemployment and a large pool of job seekers gave many companies the option of holding down the wages and benefits they offered new hires in an effort to control costs. If hiring rates improve significantly, new-hire compensation can be expected to increase. LINE provides the only published index of changes in new-hire compensation.
In the manufacturing sector, a net total of 7.7 percent of respondents reported increasing new-hire compensation in April (8.7 percent increased, 1.0 percent decreased). That is a 0.5-point decrease from April 2011. In the service sector, a net total of 9.1 percent of companies increased new-hire compensation in April (9.3 percent increased, 0.2 percent decreased). That represents a 4.3-point decline from a year earlier.
Overall, the data show that most organizations are still keeping new-hire compensation rates flat. Several private surveys have forecast minimal increases to salary budgets in 2012, typically around 3 percent.
“The slight slowdown in both hiring expectations and recruiting difficulty may be behind the fall in the new-hire compensation index for both sectors in April,” commented Schramm.
Salaried job openings dropped slightly in April 2012 compared with a year earlier. Vacancies are defined as open positions that employers are trying actively to fill. LINE data cover exempt vacancies, or primarily salaried positions, and nonexempt vacancies, which are mostly hourly employees. Changes in the number of job vacancies can be one of the earliest indicators of a shift in the balance between labor supply and demand.
In the manufacturing sector, a net total of 17.7 percent of respondents reported increases in exempt vacancies in April 2012 (25.2 percent reported increases, 7.5 percent reported decreases). This represents a 3.5-point decline from April 2011. In the service sector, a net total of 6.5 percent of respondents reported increases in exempt vacancies in April (16.1 percent reported increases, 9.6 percent reported decreases). That is a 2.0-point decrease from April 2011.
Typically, exempt employment declines by a smaller percentage than nonexempt employment during economic downturns and increases by a smaller percentage during economic expansions.
Hourly job vacancies rose in April 2012 in service and fell in manufacturing compared with a year earlier. A net total of 20.0 percent of manufacturing respondents reported that nonexempt vacancies increased in April (29.1 percent increased, 9.1 percent decreased). This represents a 6.8-point decrease from April 2011.
For nonexempt service positions, a net total of 24.7 percent of respondents reported increased vacancies in April 2012 (32.7 percent increased, 8.0 percent decreased). This marks a 13.9-point increase from April 2011.