Job creation will continue in the manufacturing and services sectors in June 2012, but for the fifth time in the past six months the rate of growth will fall behind that of the previous year in both sectors, according to the latest Society for Human Resource Management (SHRM) Leading Indicators of National Employment (LINE) survey.
Hiring in manufacturing is improving more rapidly than in service-sector companies, as a net of 43.8 percent of manufacturers will add jobs in June 2012 compared with a net of 22.4 percent of service businesses. However, neither sector’s June hiring prospects look to improve over June 2011.
“Though the monthly LINE findings continue to show positive net employment expectations, year-over-year comparisons paint a somewhat less rosy picture,” said Jennifer Schramm, GPHR, SHRM’s manager of workplace trends and forecasting.
Source: SHRM Leading Indicators of National Employment (LINE), www.shrm.org/line.
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.
The LINE results for June 2012 reflect a trend of steady job growth each month but reveal a pace that has not kept up with rates from June 2011.
“The percentage of manufacturers who say they are hiring has fallen below that of the same month in the previous year in 10 of the past 12 months,” said Schramm. “In the service sector, hiring has fallen below that of the same month in the previous year in all 12 months.”
The LINE employment expectations index provides an early indication of the U.S. Bureau of Labor Statistics’ (BLS) Employment Situation Report findings. The LINE data indicate that a net of 43.8 percent of manufacturers will add jobs in June 2012 (49.0 percent will hire, 5.2 percent will cut jobs). The sector’s hiring index has declined in 2012 on a year-over-year basis by a net of 3.2 points.
A net of 22.4 percent of service-sector companies will add jobs in June 2012 (31.0 percent will hire, 8.6 percent will trim payrolls). Overall the service hiring index will fall by 14.0 points compared with 2011. The layoff rate in both sectors will fall in June compared with a year ago.
In May 2012, difficulty in recruiting key candidates was nearly unchanged from a year earlier. The 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 13.8 percent of manufacturing respondents had more difficulty with recruiting in May 2012. This is a decrease of 0.3 points from May 2011 and the first time that manufacturers’ recruiting difficulty has fallen on an annual basis since November 2009. A net of 7.8 percent of service-sector HR professionals had more difficulty recruiting in May 2012, a decrease of 0.2 points from a year earlier. This marked only the fourth time that service-sector recruiting difficulty has fallen on an annual basis since November 2009, according to the data.
“The slight slowdown in employment expectations may be why recruiting difficulty, which had been rising steadily, is now holding fairly steady and may even be declining slightly,” Schramm said.
However, the drop in recruiting difficulty in both sectors might be a temporary occurrence. Other recent SHRM findings show that many employers are still having trouble matching the skills of job seekers with open positions. An April 2012 SHRM survey showed that 68 percent of manufacturers who were hiring full time were struggling to find qualified candidates for those jobs.
In May 2012, more companies increased compensation for new hires compared with May 2011, according to the latest LINE report, which provides the only published index of changes in new-hire compensation. If hiring rates improve significantly, new-hire compensation can be expected to increase. In the manufacturing sector, a net total of 12.5 percent of respondents reported increasing new-hire compensation in May 2012 (12.9 percent increased, 0.4 percent decreased). This represents a 4.2-point increase from May 2011 and the highest net in four years for manufacturing in May. In the service sector, a net total of 9.8 percent of companies increased new-hire compensation in May 2012 (10.3 percent increased, 0.5 percent decreased). That represents a 1.6-point increase since May 2011 and is the highest net in four years for services in May.
Overall, the data show that most organizations are still keeping new-hire compensation rates flat. Several private surveys have also shown minimal increases to salary budgets in 2012, typically around 3 percent.
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.
“Compared with a year ago, job openings [in May 2012] also were down—albeit only slightly for manufacturing—for both salaried and nonsalaried positions in both sectors,” Schramm said.
In the manufacturing sector, a net total of 17.8 percent of respondents reported increases in exempt vacancies in May 2012 (25.7 percent reported increases, 7.9 percent reported decreases). This represents a 0.7-point decline from May 2011. In the service sector, a net total of 10.6 percent of respondents reported increases in exempt vacancies in May 2012 (18.6 percent reported increases, 8.0 percent reported decreases). That is an 11.0-point decrease from May 2011.
Typically, exempt employment declines by a smaller percentage than nonexempt employment during economic downturns, which was the case again in May 2012. Hourly job vacancies also fell in both sectors in May 2012 compared with May 2011. A net total of 21.3 percent of manufacturing respondents reported that nonexempt vacancies increased in May 2012 (30.7 percent increased, 9.4 percent decreased). This represents a 2.7-point decrease from May 2011. For nonexempt service positions, a net total of 12.9 percent of respondents reported increased vacancies in May 2012 (22.1 percent increased, 9.2 percent decreased). This marks a 13.9-point decrease from May 2011.
Monthly nonexempt openings have not followed a specific trend lately when compared with the previous year, but 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.
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