LINE
Leading Indicators of National Employment®
SHRM
®
Line employment Report for apRiL 2009
Spring Season Offers Little Hope: Layoffs Surge, Hiring Expectations Fall in April
EmploymEnt ExpEctations
manufacturing
service
Employment expectations for April 2009 are at four-year lows in both manufacturing and service sectors.
-53.5 -40.7
manufacturing service
With a dearth of good news on the economic front, manufacturing and service-sector companies will keep a tight rein on payrolls in April, according to the Society for Human Resource Management’s (SHRM) Leading Indicators of National Employment (LINE) survey. Continuing the trend of recent months, April hiring expectations hit four-year lows. Hiring is down in April by two-thirds in the manufacturing sector and more than one-half in the service sector compared with the same time in 2008. Recruiting difficulty is nearly nonexistent in March. Few employers in the manufacturing and service sectors report having increased difficulty with recruiting in March compared with March of last year. Wages and benefits packages for new hires are shrinking. With employers in both sectors reporting decreases in new-hire compensation, this index was at its lowest March levels in four years in both the manufacturing and service sectors. The LINE Employment 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 two sectors employ more than 90% of the nation’s private-sector workers.
REcRuiting Difficulty
Recruiting difficulty in both sectors in March 2009 was down sharply compared with a year ago.
-24.7 -32.3
manufacturing service
nEw-HiRE compEnsation
Wages and benefits packages for new hires continued to shrink in March 2009 compared with a year ago.
-10.0 -7.0
Source: SHRM Leading Indicators of National Employment (LINE), www.shrm.org/line
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www.shrm.org/line
Line employment Report for apRiL 2009
EMPLOYMENT EXPECTATIONS Manufacturing and service-sector companies still shedding jobs
The LINE employment expectations index provides an early indication of the U.S. Bureau of Labor Statistics (BLS) Employment Situation Report numbers. BLS numbers covering the same time period are released approximately one month after the LINE report. By nearly a two-to-one margin, manufacturing-sector representatives plan to eliminate jobs in April (31.2 percent will decrease payrolls, 16.7 percent will conduct hiring). The number of manufacturing companies adding jobs in April will fall by more than two-thirds from April 2008. April has traditionally been a strong month for manufacturing job growth—in April 2007, more than 60 percent of companies added to their payrolls. That number has dwindled to 16.7 percent in just two years. The manufacturing sector lost 1.3 million jobs from the start of the recession in December 2007 through February 2009, according to the BLS. Hiring in the service sector, while still far behind 2008 levels, had shown some promise in February and March. During both of those months, more companies conducted hiring rather than layoffs. In April, however, the sector has regressed: a net of 5.5 percent of companies will cut jobs during the month (21.7 percent will add to payrolls, 27.2 percent will conduct layoffs). April’s negative net of 5.5 percent is a four-year low for LINE, down from a peak reached
Manufacturing
table 1 | Employment Expectations
%
Increasing
%
Decreasing
Net Increasing 48.6 49.7 39.0 -14.5 -53.5 53.0 47.8 35.2 -5.5 -40.7
Apr 2006 Apr 2007 Apr 2008 Apr 2009 Annual change Apr 2006 Apr 2007 Service Sector Mar 2008 Apr 2009 Annual change
57.6 60.7 51.5 16.7 -34.8 58.2 55.7 46.7 21.7 -25.0
9.0 11.0 12.5 31.2 18.7 5.2 7.9 11.5 27.2 15.7
in April 2006, when 53 percent of service-sector companies added jobs.
RECRUITING DIFFICULTY With an abundance of talent available, companies report little difficulty with recruiting
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. For the first time in four years in March, LINE recorded single-digit response levels for those reporting increased difficulty with recruiting. The low response totals can likely be attributed to two factors: fewer HR professionals are engaged in recruiting right now during the economic downturn, and, with an increased number of people looking for work, HR professionals and recruiters can afford to be selective and are having few issues with finding top-level talent. In the manufacturing sector, only 2.7 percent of respondents reported increased recruiting difficulty in March, compared with 24.0 percent who reported less difficulty. This is the first time in four years in March that more manufacturers reported an easier time recruiting as opposed to those who had more difficulty. The gap was even wider in the service sector. In March, just 1.7 percent of service-sector respondents reported increased recruiting difficulty, compared with 25.4 percent who had less difficulty. With millions of people seeking work and fewer existing opportunities, a reverse to this trend in the LINE recruiting difficulty index is not likely in the near future.
table 2 | Recruiting Difficulty
%
Increasing
%
Decreasing
Net Increasing 29.4 24.2 3.4 -21.3 -24.7 10.0 14.4 8.6 -23.7 -32.3
Mar 2006 Mar 2007 Manufacturing Mar 2008 Mar 2009 Annual change Mar 2006 Mar 2007 Service Sector Mar 2008 Mar 2009 Annual change
32.4 27.8 14.2 2.7 -11.5 16.0 16.6 16.4 1.7 -14.7
3.0 3.6 10.8 24.0 13.2 6.0 2.2 7.8 25.4 17.6
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www.shrm.org/line
Line employment Report for apRiL 2009
NEW-HIRE COMPENSATION Rate of increase in wages and benefits packages is at a four-year low
Many companies have scuttled hiring plans during the recession, and wages and benefits are also getting trimmed in an ongoing effort to control costs. LINE provides the only published index of new-hire compensation. In the manufacturing sector, a net total of 1.3 percent of respondents said they would decrease new-hire compensation in March (1.3 percent increased, 2.6 percent decreased). That is the lowest March response total and the first time in four years that the net total for manufacturers ventured into negative territory. The service sector is also showing a four-year low for March when it comes to net increases to new-hire compensation packages. A net total of 2.2 percent of companies reduced wages and benefits packages for new hires in March (1.2 percent increased, 3.4 percent decreased). The low response total in both sectors indicates that many companies are likely keeping wages and benefits packages flat for new hires.
Manufacturing
table 3 | new-Hire compensation
%
Increasing
%
Decreasing
Net Increasing 11.0 5.5 8.7 -1.3 -10.0 7.8 7.4 4.8 -2.2 -7.0
Mar 2006 Mar 2007 Mar 2008 Mar 2009 Annual change Mar 2006 Mar 2007 Service Sector Mar 2008 Mar 2009 Annual change
12.2 8.3 9.2 1.3 -7.9 11.7 8.0 6.7 1.2 -5.5
1.2 2.8 0.5 2.6 2.1 3.9 0.6 1.9 3.4 1.5
VACANT POSITIONS IN EXEMPT EMPLOYMENT Exempt vacancies plummet as hiring freezes and job cuts take hold
Vacancies are defined as open positions that employers are actively trying to fill. Typically, exempt employment declines by a smaller percentage than nonexempt employment during economic downturns and increases by a smaller percentage during economic expansions. 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. HR professionals in both the manufacturing and service sectors reported declines in exempt vacancies in March compared with this time last year. In the manufacturing sector, a net total of 8.3 percent of respondents reported decreases in exempt vacancies (8.7 percent reported increases, 17.0 percent reported decreases). Among the major job sectors, manufacturing had the second lowest number of job openings in January 2009, trailing only the construction industry, according to the BLS. In the service sector, a net total of 11.3 percent of respondents reported declines in exempt vacancies in March (7.7 percent reported increases, 19.0 percent reported decreases). Other data echo LINE’s results: In January 2009, there were table 4 | Exempt Job Vacancies
%
Increasing
%
Decreasing
Net Increasing 24.0 16.3 15.7 -8.3 -24.0 19.4 22.4 11.2 -11.3 -22.5
Mar 2006 Mar 2007 Manufacturing Mar 2008 Mar 2009 Annual change Mar 2006 Mar 2007 Service Sector Mar 2008 Mar 2009 Annual change
33.8 25.8 28.1 8.7 -19.4 28.9 33.5 29.6 7.7 -21.9
9.8 9.5 12.4 17.0 4.6 9.5 11.1 18.4 19.0 0.6
3 million job openings in the United States. That represents a 35 percent drop from September 2007, when the number of job openings began a gradual monthly decline, according to the BLS.
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www.shrm.org/line
Line employment Report for apRiL 2009
VACANT POSITIONS IN NONEXEMPT EMPLOYMENT Vacancies for hourly jobs also dropping steadily
In contrast to exempt employment, nonexempt employment typically decreases by a greater percentage than exempt employment during economic downturns and increases by a larger percentage during economic expansions. A net total of 9.2 percent of manufacturing respondents reported that nonexempt vacancies declined in March (9.6 percent increased, 18.8 percent decreased). A year ago, manufacturing respondents were still reporting increases in vacancies (a net total of 10.5 percent). This indicates that manufacturers were still hiring only 12 months ago and had yet to face the worst of the economic downturn. For nonexempt service positions, a net total of 8.4 percent reported decreased vacancies in March (15.0 percent increased, 23.4 percent decreased). With vacancy levels falling in both sectors, LINE data show that more employers are either cutting jobs or imposing hiring freezes during the economic downturn. Other national data reinforce LINE’s findings: In January 2009, the national job openings rate was 2.2 percent, the lowest level in five years, according to the BLS.
Manufacturing
table 5 | nonexempt Job Vacancies
%
Increasing
%
Decreasing
Net Increasing 23.8 16.2 10.5 -9.2 -19.7 14.5 13.6 -1.0 -8.4 -7.4
Mar 2006 Mar 2007 Mar 2008 Mar 2009 Annual change Mar 2006 Mar 2007 Service Sector Mar 2008 Mar 2009 Annual change
35.9 32.7 26.5 9.6 -16.9 27.4 29.4 22.3 15.0 -7.3
12.1 16.5 16.0 18.8 2.8 12.9 15.8 23.3 23.4 0.1
AbOUT THIS REPORT
Schedule of Release
The SHRM LINE Report is released at 9:00 a.m. Eastern time on the third Friday after the conclusion of the week including the 12th of the month. The SHRM employment expectations index describes the same time period referenced approximately one month later in the Employment Situation Report issued by the Bureau of Labor Statistics. For example, the LINE employment expectations index released on April 3, 2009, describes the same April time period that the BLS will report on May 8, 2009. LINE has tracked manufacturing-sector hiring trends since 2004 and service-sector trends since 2005. The SHRM LINE indices are not seasonally adjusted. LINE users are encouraged to take seasonality into consideration by comparing the LINE indices for the current month with the comparable LINE indices for the same month one year earlier. The responses in the LINE survey are weighted using the proportion of total employment represented by the respondent’s industry. These weights are calculated using the annual benchmark revisions that the BLS released on February 2, 2009. For more information, visit www.shrm.org/line.
Media Contacts
Julie malveaux, manager, media affairs, sHRm: Julie.Malveaux@ shrm.org
For Other Inquiries
Jennifer schramm, m. phil., manager, workplace trends and forecasting, sHRm: Jennifer.Schramm@shrm.org steven Director, ph. D., economic advisor for the sHRm linE Report, Rutgers university: Steven.Director@Rutgers.edu
Methodology
The SHRM LINE data are collected through a monthly survey of human resource executives at more than 500 manufacturing and 500 service-sector firms. The net increasing index is calculated as the percentage increasing minus the percentage decreasing. For the employment expectations index, annual change is calculated by subtracting from the % increasing, decreasing and net increasing values for the coming month the value of each from the same month one year ago. For all other indices, the annual change is calculated by subtracting from the % increasing, decreasing and net increasing values for the current month the value of each from the same month one year ago.
Disclaimer © 2009 Society for Human Resource Management. Permission is granted to copy this work with appropriate attribution to copyright owners. All content is for informational purposes only and is not to be construed as a guaranteed outcome. SHRM cannot accept responsibility for any errors or omissions, or any liability resulting from the use or misuse of any such information. 09-0229