SHRM LINE: Hiring Rate Will Fall Again in January 2012

For the third consecutive month, hiring activity will decrease and job cuts will rise in the manufacturing and service sectors compared with a year earlier, according to the Society for Human Resource Management’s (SHRM) Leading Indicators of National Employment (LINE) survey for January 2012.
The latest LINE report finds that although hiring is trending up, it is doing so very slowly and at a rate that is below that of January 2011. Meanwhile, the difficulty of recruiting candidates for critical positions is increasing in the manufacturing and service sectors. And while the rate of increase for wages and benefits offered to new hires rose slightly on an annual basis in manufacturing in December 2011, it declined in the services sector.
Some reports about the health of the U.S. economy and forecasts for 2012 were positive during the final days of 2011, but job growth has remained stagnant. Economists and labor market experts note that the economy and the labor market are differen
t, and hiring typically lags behind economic improvement. However, the economy and job market share at least one characteristic: Each is fragile and could be impacted severely by events in 2012.
What Congress does will be watched very closely by U.S. employers in the new year. Though late in 2011 Congress passed, and President Barack Obama signed, a two-month extension of a payroll tax cut for employees and long-term unemployment benefits, the issues must be revisited early in 2012. Political uncertainty and Congress’s recent history of brinksmanship will leave many organizations jittery.
A default by a European nation on its debts could send shockwaves through the U.S. and world economies, as could actions by other nations, such as Iran. Oil prices and Federal Reserve policies will be monitored. The factors that could stimulate confidence in the economy are far outnumbered by those that could crush it.
About That Good News…
Several positive signs surfaced in late 2011: The official U.S. unemployment rate dropped to 8.6 percent. The number of people applying for unemployment benefits declined. Experts forecast U.S. economic growth for 2012 at around 2.4 percent, up from an expected 2011 rate of less than 2.0 percent. Residential home construction rose, as did small-business confidence.
However, some of these trends could be temporary, as the U.S. economy benefited from restocking of inventories and reduced consumer savings late in 2011. And most of the 2012 economic growth is forecast to materialize in the second half of the year.
Basically, the U.S. job market is in a holding pattern, creating roughly enough jobs each month to account for the increase in Americans in the job pool, such as through population growth. And the official unemployment rate masks some underlying issues: Many people are working part time despite wanting full-time jobs, and some unemployed people have stopped trying to find a job.
“Though net employment expectations are positive, they continue to follow the trend of lower increases than at the same time one year ago,” said Jennifer Schramm, GPHR, manager of SHRM’s workplace trends and forecasting. “Higher net job growth will be needed over an extended time period to bring down the unemployment rate.”
Employment Expectations
The LINE employment expectations index provides an early indication of the U.S. Bureau of Labor Statistics (BLS) Employment Situation Report findings. The LINE manufacturing hiring index will fall in January 2012 on a year-over-year basis by a net of 4.4 points (a net of 25.2 percent of companies will hire in January 2012, compared with a net of 29.6 percent that added jobs a year earlier). Service-sector hiring will drop significantly in January 2012, by a net of 15.4 points (a net of just 6.1 percent will add jobs, compared with a net of 21.5 percent that conducted hiring a year earlier).
The LINE results for January 2012 reflect a continuing trend of subpar growth in job creation, in accord with recent federal data. For the 12-month period ending November 2011, payroll employment increased by an average of 131,000 jobs per month, according to the BLS. Many economists say twice that number is needed each month to bring down the unemployment rate steadily.
The LINE report is based on a monthly survey of private-sector human resource professionals at more than 500 manufacturing and 500 service-sector companies. These two sectors employ more than 90 percent of the nation’s private-sector workers. The LINE indices are not seasonally adjusted.
Recruiting Difficulty
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 11.6 percent of manufacturing respondents had more difficulty with recruiting in December 2011. This is a net increase of 2.9 points from December 2010 and the highest net of recruiting difficulty in four years in December. A net of 9.1 percent of service-sector HR professionals had more difficulty recruiting in December 2011, an increase of 5.8 points from a year earlier and also the highest net for December in four years. The recruiting difficulty data suggest that the labor market is suffering partially from structural issues along with decreased demand.
A November 2011 SHRM survey found that 52 percent of HR professionals were having trouble finding properly skilled workers for job openings at their companies. With the exception of March 2011, LINE’s recruiting difficulty index has risen on an annual basis in both sectors for every month since December 2009.
Commented Schramm: “Despite the somewhat disappointing employment expectations, recruiting difficulty continues to climb. Even with overall weak job growth, some job openings for high-skilled positions are growing harder to fill.”
New-Hire Compensation
During the recession, a high rate of unemployment and a large pool of job seekers in the market gave many companies the option of holding down the wages and benefits they offered new hires in an effort to control costs. LINE provides the only published index of new-hire compensation.
In the manufacturing sector, a net total of 3.5 percent of respondents reported increasing new-hire compensation in December 2011 (4.7 percent increased, 1.2 percent decreased). That is an increase of 0.6 points from December 2010. In the service sector, a net total of 2.1 percent of companies decreased new-hire compensation in December 2011 (4.0 percent increased, 6.1 percent decreased). That represents a 3.9-point decrease from a year earlier and the first time since September 2010 that fewer service-sector employers increased new-hire compensation compared with the previous year.
“Overall, most organizations are still keeping compensation rates flat,” said Schramm.
Vacant Positions
In the manufacturing sector, a net total of 10.9 percent of respondents reported increases in exempt vacancies in December 2011 (21.4 percent reported increases, 10.5 percent reported decreases). This represents a 1.0-point decline from December 2010. In the service sector, a net total of 2.2 percent of respondents reported increases in exempt vacancies in December (10.8 percent reported increases, 8.6 percent reported decreases). That is a 0.2-point decrease from December 2010.
In contrast to exempt employment, nonexempt employment typically decreases by a greater percentage during economic downturns and increases by a larger percentage during economic expansions.
A net total of 8.6 percent of manufacturing respondents reported that nonexempt vacancies increased in December 2011 (24.6 percent increased, 16.0 percent decreased). This represents a 5.4-point decrease from December 2010. For nonexempt service positions, a net total of 0.5 percent of respondents reported increased vacancies in December 2011 (14.1 percent increased, 13.6 percent decreased). This marked a 17.5-point decrease from December 2010.
The decline in nonexempt openings in both sectors could be attributable to decreased demand, but it also is a function of some companies getting more production out of existing employees rather than committing to new hires. According to SHRM’s Jobs Outlook Survey, 16 percent of respondents expected their hourly employees to work longer hours during the fourth quarter of 2011 compared with the third quarter.
Steve Bates is manager of online editorial content for SHRM. Click here to read the original article.