Service-Sector Hiring Expected to Hit Four-Year High

News Updates

December hiring activity will be stronger in the service sector than in the manufacturing sector compared with December 2011, according to the Society for Human Resource Management’s (SHRM) Leading Indicators of National Employment (LINE) survey, released Dec. 6, 2012.

The LINE Employment Report examines employers’ hiring expectations and job vacancies, difficulty in recruiting top-level talent and new-hire compensation. Results are based on a monthly survey of private-sector human resource professionals at more than 500 manufacturing and 500 service-sector companies.

Overall, this month’s results show that job creation will be steady; approximately one-quarter of manufacturing respondents report their company will add jobs, and approximately one-third of respondents representing the service sector report that their company will add jobs in December. While recruiting difficulty fluctuated in both sectors in November 2012, new-hire compensation remained flat.

Source: SHRM Leading Indicators of National Employment (LINE),

Employment Expectations

In December, for the fifth consecutive month, the hiring rate will rise in services compared with the previous year. A net of 34 percent of service-sector companies responding to the survey reported that they expect to grow payrolls in December (43.3 percent will conduct hiring, 9.3 percent will cut jobs), and the service hiring index will rise by 12.2 points compared with December 2011. That is the highest net level of hiring for services in December in the past four years.

For the first time in five months, however, the hiring rate will decline in the manufacturing sector compared with a year ago. A net of 25.3 percent of manufacturers will add jobs in December (38.9 percent will hire, 13.6 percent will cut jobs). This means the sector’s hiring index will fall in December on a year-over-year basis by a net of 3.8 points.

“Manufacturing hiring is holding up, but is not as strong as in services and actually declined slightly compared to the same time a year ago,” said Jennifer Schramm, GPHR, SHRM’s manager of workplace trends and forecasting. “This is the first month out of the last five where year-over-year hiring was down in manufacturing. On the other hand, the brisk hiring expected in the services sector might be the result of a more positive outlook for holiday hiring and consumer spending compared to last year.”

LINE data have compared favorably with recent reports from the U.S. Bureau of Labor Statistics (BLS). Professional and business services, as well as retail trade, have posted sizable job gains in the past few months, according to BLS.

Exempt, Nonexempt Vacancies

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 November, there was both positive and negative fluctuation in hiring of exempt and nonexempt positions in the manufacturing and services sectors compared to November 2011.

Losing ground, in the manufacturing sector, a net total of 5.8 percent of respondents reported increases in exempt vacancies in November (18 percent reported increases, 12.2 percent reported decreases), representing a 1.6-point decrease from November 2011. A net total of 7.7 percent of manufacturing respondents reported that nonexempt vacancies increased in November (22 percent increased, 14.3 percent decreased), representing a 3.4-point decrease from November 2011.

In the service sector, however, a net total of 10.1 percent of respondents reported increases in exempt vacancies in November (20.9 percent reported increases, 10.8 percent reported decreases), which represents a substantial 11.1-point increase from November 2011. For nonexempt service positions, a net total of 14.3 percent of respondents reported increased vacancies in November (27.2 percent increased, 12.9 percent decreased), marking a 6.9-point increase from November 2011.

Monthly openings have not followed a specific trend lately when compared with the previous year, said Schramm. Overall, HR professionals in both sectors have 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 both exempt and nonexempt openings.

Recruiting Difficulty, New-Hire Compensation

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. Overall, Schramm said the recruiting difficulty indices lined up in a similar way to employment expectations—up in services, but down slightly in manufacturing when compared with November 2011.

A net 13.4 percent of manufacturing respondents had more difficulty with recruiting in November, a small decline of 0.1 points from November 2011. A net 10.2 percent of service-sector HR professionals had more difficulty recruiting in November, an increase of 9.9 points from a year ago. That marks the highest net level of recruiting difficulty for the service sector in November in four years.

In November, the rate of increase for new-hire compensation changed little from November 2011, as well. In the manufacturing sector, a net total of 4.8 percent of respondents reported increasing new-hire compensation in November 2012, down 1.2 points from November 2011. In the service sector, a net 7.5 percent of companies increased new-hire compensation in November, representing a 2.4-point decrease from a year ago.

The flat compensation rates supported by LINE data are consistent with recent BLS findings on real average hourly earnings, which fell 0.7 percent in October 2012 compared with October 2011. Several other surveys have projected minimal increases to 2013 salary budgets, also, which are most commonly projected to increase an average of 2.5 percent to 3 percent.

Theresa Minton-Eversole is an online editor/manager for SHRM. To read the original article, please click here.