SHRM's LINE Report September 2011


More Layoffs, Slow Hiring Expected at Close of Third-Quarter 2011

Job growth for September 2011 will fall behind the rate recorded for September 2010 in the manufacturing and service sectors, according to the results of the latest Leading Indicators of National Employment (LINE) survey released Sept. 1, 2011, by the Society for Human Resource Management. Payroll cuts also are expected to rise in September 2011, according to the LINE.

The LINE report examines four key areas: employers’ hiring expectations, job vacancies, recruiting difficulty and new-hire compensation. 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 United States’ private-sector workers.

Employment Expectations

The rate of job creation will decline moderately in manufacturing and fall sharply in services in September 2011 compared with September 2010, marking the third consecutive month of labor market declines.

The manufacturing hiring index will drop in September 2011 on a year-over-year basis by a net of 9.6 points (i.e., a net of 28.4 percent of companies will hire in September 2011, compared with a net of 38.0 percent that added jobs in September 2010). Service-sector hiring will decrease in September 2011 by a net of 15.3 points (i.e., a net of 22.1 percent will add jobs, compared with a net of 37.4 percent that added jobs in September 2010).

The LINE results for September 2011, which are in accord with recent federal data, reflect what may be a setback for the labor market’s recovery, according to Jennifer Schramm, GPHR, SHRM’s manager of workplace trends and forecasting. Nonfarm payrolls grew by just 117,000 jobs in July 2011, according to the U.S. Bureau of Labor Statistics (BLS)—not nearly enough to make a dent in unemployment.

“These declines may only be a temporary setback, but they do suggest that steady improvements in the job market are still a long way away,” Schramm told SHRM Online.

The September 2011 LINE report also reveals a rise in layoffs, with 15.8 percent of manufacturers reporting that they plan to cut jobs; this percentage is up from 14.6 percent in September 2010. In addition, 9.9 percent of service-sector companies report they plan to eliminate jobs in September 2011, up from 7.8 percent in September 2010.

Exempt, Nonexempt Position Vacancies

Vacancies are defined as open positions that employers are actively trying to fill. 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.

Not surprisingly, the past few months of slowed hiring and increased layoffs are affecting job vacancy rates. Salaried job openings rose in both sectors in August 2011 compared with August 2010.

In the manufacturing sector, a net total of 23.0 percent of respondents reported increases in exempt vacancies in August 2011. This represents a 9.3-point increase from August 2010. In the service sector, a net total of 6.2 percent of respondents reported increases in exempt vacancies in August 2011, a 2.1-point increase from August 2010.

However, vacancies for hourly jobs were virtually unchanged in August 2011 compared with August 2010. A net total of 21.1 percent of manufacturing respondents reported that nonexempt vacancies increased in August 2011, representing only a net 0.5-point decrease from August 2010. There were 211,000 job openings in manufacturing in June 2011, unchanged from May 2011, according to the BLS.

For nonexempt service positions, a net total of 13.8 percent of respondents reported increased vacancies in August 2011, marking a 2.9-point increase from August 2010. Job openings increased slightly in professional and business services and dropped slightly in education and health services in June 2011 compared with May 2011, according to the BLS.

Recruiting Difficulty

HR professionals also reported in August 2011 that they continue to have trouble landing candidates for key positions. A net of 17.8 percent of manufacturing respondents had more difficulty with recruiting in August 2011. This is a sharp net increase of 15.6 points from August 2010, and the highest net of recruiting difficulty in four years.

A net of 11.5 percent of service-sector HR professionals also reported having more difficulty recruiting in August 2011—a jump of 14.1 points from August 2010 and also the highest net in four years. The recruiting difficulty data suggests that the labor market is suffering from structural issues, along with decreased demand. With the exception of March 2011, recruiting difficulty has risen on an annual basis in both sectors for every month since December 2009.

“Despite the decline in the hiring outlook, HR professionals in both sectors are reporting increased difficulty with recruiting candidates for their key vacancies,” said Schramm.   “This suggests that despite the large number of unemployed job seekers, there are potentially growing shortages in certain kinds of high-skilled jobs.”

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 that they offered new hires in an ongoing effort to control costs. New-hire compensation is now beginning to rise, albeit slightly. The rate of increase for new employees’ wages and benefits rose in August 2011, marking the 11th consecutive month of increases according to the LINE.

In the manufacturing sector, a net total of 8.5 percent of respondents reported increasing new-hire compensation in August 2011. That is an increase of 3.1 points from August 2010. In the service sector, a net total of 10.9 percent of companies increased new-hire compensation in August 2011; that represents a 9.2-point increase from August 2010. Overall, the rate of new-hire compensation has risen in small increments on an annual basis in both sectors for every month except September 2010 since February 2010.

“Rising recruiting difficulty may be why slightly more HR professionals are reporting increased compensation packages for new hires in August 2011,” Schramm noted.  “However, the vast majority are keeping new-hire salaries where they are; this makes it likely that overall wage growth is also fairly stagnant.”