Slow (to No) Hiring Activity Expected for October 2011

Slow (to No) Hiring Activity Expected for October 2011

10/6/2011 By Theresa Minton-Eversole

Though this is the time of year that U.S. employers begin shoring up their staffs for the holiday shopping season, job growth is not expected to rebound much in October 2011, according to the Society for Human Resource Management’s (SHRM) Leading Indicators of National Employment (LINE) survey for October 2011.

Hiring expectations are anemic in October 2011, with the rate of job creation expected to be virtually unchanged from that of October 2010 in manufacturing. Job creation is expected to fall moderately in services in October 2011, compared with October 2010.

“HR professionals are reporting that hiring is basically at a standstill for October [2011],” said Jennifer Schramm, GPHR, SHRM’s manager of workplace trends and forecasting. “Manufacturing firms are adding jobs at the same rate as at this time last year, while private service-sector firms are reporting a small downturn in hiring compared to October [2010].”

The LINE report examines four key areas: employers’ hiring expectations, job vacancies, difficulty in recruiting top-level talent 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. Employment Expectations Manufacturing Service.

In October 2011, hiring activity will rise slightly in manufacturing and will drop moderately in services compared with October 2010.

+1.1

-10.4

Recruiting Difficulty

In September 2011, the index for recruiting difficulty rose slightly in both sectors compared with September 2010.

+4.9

+4.6

New-Hire Compensation
The rate of increase for new-hire compensation in September 2011 rose in both sectors compared with September 2010.

+6.7

+2.9

Source: SHRM Leading Indicators of National Employment (LINE), www.shrm.org/line

Employment Expectations

The manufacturing hiring index will rise in October 2011 on a year-over-year basis by a net of just 1.1 points (a net of 30.4 percent of companies will hire in October 2011, compared with a net of 29.3 percent that added jobs in October 2010). Service-sector hiring, however, will decrease in October 2011 by a net of 10.4 points (a net of 29.0 percent will add jobs, compared with a net of 39.4 percent that added jobs in October 2010), according to LINE data.

The LINE results for October 2011 reflect a trend of subpar growth in job creation, in accord with recent federal data. Nonfarm payrolls were unchanged in August 2011, according to the U.S. Bureau of Labor Statistics (BLS), and the manufacturing sector, which has been one of the economy’s strongest performers for job growth, lost a net of 3,000 jobs during the month.

Exempt, Nonexempt Position Vacancies

LINE data cover exempt vacancies, which are 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.

In the manufacturing sector, a net total of 10.4 percent of respondents reported increases in exempt vacancies in September 2011, which represents a 3.0-point decrease from September 2010. A net total of 11.2 percent of manufacturing respondents reported that nonexempt vacancies increased in September 2011, representing a net 0.1-point decrease from September 2010. There were 257,000 job openings in manufacturing in July 2011, up slightly from June 2011, according to the BLS.

Service-sector job creation is expected to be even less impressive. In its annual holiday hiring forecast, global outplacement consultancy Challenger, Gray & Christmas, Inc., predicted in September 2011 that seasonal job gains in the retail sector would be about the same or possibly lower than in September 2010.

“The retail environment has improved significantly since 2008, when the recession was at its worst,” said John A. Challenger, CEO of Challenger, Gray & Christmas. “However, retailers are seeing several signs that consumer spending is dipping just as they are beginning to make decisions about how many workers to add for the upcoming holidays. It would be surprising if holiday hiring exceeded last year’s level.”

Even if retailers foresee strong sales, it might not result in increased hiring, according to Challenger. A survey of major U.S. retailers by management consultants at the Hay Group found that 68 percent expect sales to be higher than in 2010. Yet the same percentage plans to hire the same number of seasonal workers as were hired in 2010. About one-fourth of respondents said they plan to reduce the number of seasonal hires.

The dismal forecast is reflected in the most recent LINE data, too. In the service sector, a net total of 7.4 percent of respondents reported increases in exempt vacancies in September 2011—a 2.5-point increase from September 2010. For nonexempt service positions, a net total of 18.0 percent of respondents reported increased vacancies in September 2011, marking a 3.5-point increase from September 2010.

Recruiting Difficulty

“Even with subdued hiring rates and elevated unemployment, once again we are seeing the recruiting difficulty index rise in both sectors,” said Schramm. “This suggests that employers are having difficulty connecting with job seekers who possess the skills they are looking for.”

For example, a net of 9.7 percent of manufacturing respondents had more difficulty with recruiting in September 2011—a net increase of 4.9 points from September 2010 and the highest net of recruiting difficulty for the month of September in four years.

A net of 11.6 percent of service-sector HR professionals had more difficulty recruiting in September 2011—an increase of 4.6 points from September 2010 and also the highest net in four years. The recruiting difficulty data suggest that the labor market is suffering from structural issues along with decreased demand.

Considering that millions of people are seeking work and cannot obtain employment in their industries, the rise in recruiting difficulty might be attributed to new or enhanced skill requirements for new high-level jobs, noted Schramm. “With the exception of March 2011, recruiting difficulty has risen on an annual basis in both sectors for every month since December 2009,” she noted.

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 the effort to control costs. New-hire compensation is now beginning to rise, albeit only slightly.

In the manufacturing sector, a net total of 8.7 percent of respondents reported increasing new-hire compensation in September 2011—an increase of 6.7 points from September 2010. In the service sector, a net total of 7.9 percent of companies increased new-hire compensation in September 2011, representing a 2.9-point increase from a year ago. With the exception of September 2010, the rate of new-hire compensation has risen in small increments on an annual basis in both sectors for every month since February 2010.

“Skills shortages may be why we are seeing some increases in the new-hire compensation indices,” said Schramm. “For the 12th consecutive month, the rate of increase for wages and benefits rose on an annual basis in both sectors. This does not mean that everyone is seeing their wages increase; overall most employers are keeping new-hire compensation flat. But the percentage reporting increases continues to rise incrementally, indicating that the need to find talent is pushing some employers to boost their starting wages and compensation.”

Theresa Minton-Eversole is an online editor/manager for SHRM.