SHRM LINE: Manufacturers Expect to Hire in March 2012; Services Jobs Remain Scarce

News Updates

Half of manufacturing companies and a quarter of service-sector companies polled plan to expand their payrolls in March 2012, according to the Society for Human Resource Management (SHRM) Leading Indicators of National Employment (LINE) survey.

Overall, a net of 50.5 percent of manufacturers report they will add jobs and a net 24.7 percent of service-sector companies report that they will do so during March 2012 compared with March 2011, according to the LINE data released March 8, 2012. In addition, more HR professionals in manufacturing reported they had increased difficulty with recruiting key candidates in February 2012 compared with February 2011, though the recruiting difficulty index fell for the service sector. The same fluctuations were seen in the two sectors’ new-hire compensation data, with the rate of increase for wages and benefits rising in manufacturing and falling in services during February 2012, albeit minimally for both sectors.

However, continued wage stagnation, particularly prevalent in temporary employment, could indicate a major disconnect between government data on employment gains and what employers and employees are experiencing, according to data released by Philadelphia-based staffing services firm Yoh.

Employment Expectations Grow for Certain Sectors

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 manufacturers will hire at a strong pace in March 2012, creating jobs at the highest rate since July 2006. The sector’s index will rise in March 2012 on a year-over-year basis by a net of 4.8 points; however, the service hiring index will fall by 10.3 points compared with March 2011.

Salaried job openings in both sectors remained virtually unchanged in February 2012 compared with February 2011. 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. Typically, exempt employment declines by a smaller percentage than nonexempt employment during economic downturns and increases by a smaller percentage during economic expansions.

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. Vacancies for hourly jobs rose in February 2012 in both sectors compared with February 2011.

The increase in nonexempt openings is in line with BLS data. In December 2011, there were 264,000 job openings in manufacturing, a sizable increase from the 184,000 openings reported in December 2010. The education and health services sectors had a combined 588,000 openings in December 2011, up sharply from 510,000 openings in December 2010.

The LINE results for March 2012 reflect a trend of overall steady growth in job creation, in accord with recent federal data. January 2012 data from the BLS showed that 50,000 manufacturing jobs were created during that month. Several industries related to the service sector also posted employment gains for the month.

But the uptick in hiring expectations does not indicate a radical improvement in the U.S. employment picture, according to Joseph Coombs, SHRM’s workplace trends and forecasting specialist.

“We continue to see steady improvement in job growth, but we need to keep in mind that fundamental problems remain with the labor market,” Coombs said. “More than 12 million people are still out of work, and many employers say they’re still having trouble finding properly skilled workers for their open positions. This suggests that training and education efforts are needed, along with significantly higher demand for labor in general, in order to make a sizable dent in the unemployment rate.”

Recruiting Difficulty Increases, Unlike New-Hire Pay

Some HR professionals reported that they still struggled in February 2012 to land qualified workers for key positions, according to the LINE, which measures how difficult it is for firms to recruit candidates to fill the positions of greatest strategic importance to their companies. The recruiting difficulty data, particularly in manufacturing, suggest that the labor market is suffering partially from structural issues.

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 U.S. to staff positions that were deemed difficult to fill.

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 the effort to control costs. If hiring rates improve significantly, new-hire compensation can be expected to increase, said Coombs.

But for February 2012, the index’s data show there was minimal change in compensation for new hires compared with February 2011. This is consistent with BLS findings on real average hourly earnings, which fell 1.0 percent in January 2012 compared with January 2011. Several private surveys have forecast modest increases to salary budgets in 2012, most commonly around 3 percent.

Temp Wages Help Confirm Lackluster Rebound

First-quarter 2012 findings in the Yoh Index released March 5, 2012, indicated continued stagnation in salary rates in the temporary sector of the U.S. employment market.

Temporary skilled employees often are considered bellwethers of economic activity that offer businesses the ability to add or subtract competent employees quickly as demand fluctuates, Yoh reported. As the economy strengthens, wages for temporary skilled workers should increase as employers add temporary workers as a way to capitalize on surging economic activity in advance of adding permanent employees and cementing long-term fixed costs.

No such demand was found in the most recent Yoh Index, however, which has been tracking wage increases for skilled temporary workers since 2001. In fact, the Yoh Index barely budged for the fourth quarter of 2011, ending the year at 114.26, just a 1.15 percent increase over the same quarter for 2010. 

How can employment rise while temporary workers’ wages remain flat?  

Much of it has to do with the employment participation rate, which stood at 63.7 percent in early 2012, the lowest since the early 1980s, according to Yoh experts who track employment trends. An artificially low employment participation rate decreases the unemployment rate by reducing the total number of people looking for work.

A recent survey commissioned by Yoh and conducted by Amplitude Research found that systemic uncertainty over the economy and structural inefficiencies in the hiring process continue to suppress U.S. employment and threaten to do so well into the future. 

While economic uncertainties and lack of demand for products are out of the control of most organizations, the survey found that factors within their control are also delaying a rebound in hiring.

"In large part, this delay is due to poor workforce planning, an area of enterprise management that has not kept pace with other business practices, such as logistics, supply or distribution," said Yoh President Lori Schultz in a statement. “Smart companies must plan for workforce logistics with the same discipline and forethought as other business disciplines. Businesses have been slow to apply truly proactive employment strategies … and until the economy strengthens and employers take proactive steps to improve workforce planning, the malaise is likely to continue for American employers and employees."

The LINE Employment Report examines four key areas: employers’ hiring expectations, job vacancies, new-hire compensation and 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.

Theresa Minton-Eversole is an online editor/manager for SHRM. Click here to read the original article.