Employment Expectations for October '07

September 27, 2007

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The Society for Human Resource Management (SHRM) and the Rutgers University School of Management and Labor Relations have released their monthly SHRM/Rutgers LINE Employment Expectations Report for October 2007, providing industry insights on hiring and recruiting.

Key findings are as follows:

Lowest October employment expectations since the LINE series was initiated; Smallest manufacturing new-hire wage growth in four years; and Service-sector recruiting difficulty at lowest in three years.

Manufacturing Net Increase Index October 2007

Employment Expectations: 38.2 New Hire Compensation: 2.9 Exempt Vacancies: 19.7 Nonexempt Vacancies: 27.3 Recruiting Difficulty: 25.3

Service Sector Net Increase Index October 2007

Employment Expectations: 40.1 New Hire Compensation: 14.6 Exempt Vacancies: 17.9 Nonexempt Vacancies: 34.0 Recruiting Difficulty: 5.8

Employment Expectations In the manufacturing sector, the employment expectations index dropped substantially, from 50.0 in October 2006 to 38.2 in October 2007. In the service sector, the index dropped from October 2006's 48.9 to October 2007's 40.1. This time last year, private service-sector employment rose by 137,000 jobs on a seasonally adjusted basis.

New Hire Compensation Whereas the new-hire compensation index for manufacturing this month is "well below the level of a year ago," according to the latest SHRM/Rutgers LINE report, the new-hire compensation index in the service sector is only slightly lower than it was a year ago, which is in line with the reduced service-sector employment growth expectations

Vacancies (Exempt and Nonexempt) Vacancies are defined as open positions that employers are actively trying to fill. Total labor demand is the sum of current employment and current job vacancies. Exempt vacancies are those in positions that are exempt from the overtime provisions of the Fair Labor Standards Act (e.g., salaried, executive, administrative, professional). Nonexempt vacancies are vacancies in positions not exempt from the overtime provisions of the Fair Labor Standards Act (e.g., most hourly employees).

"Typically, exempt employment declines by a smaller percentage than nonexempt employment during economic downturns and increases by a smaller percentage during economic expansions," according to the report. "Changes in the number of job vacancies can be one of the earliest indicators of a shift in the balance between labor supply and labor demand."

In the manufacturing sector, the September 2007 exempt vacancy index is higher than the September 2006 rate and the nonexempt vacancy index is also higher than the levels of September 2006. These numbers are consistent with the lower manufacturing employment growth we've been seeing recently and suggest that the sluggishness in manufacturing employment is affecting exempt and nonexempt workers alike.

In the service sector, the exempt vacancy index decreased from 22.0 in September 2006 to this month's 17.9. The nonexempt vacancy index for the service sector rose from 27.9 in September 2006 to 34.0 in September 2007, suggesting that the drop in service‐sector employment growth seen in Table 1 is primarily in exempt employees.

Recruiting Difficulty Recruiting difficulty continues to be a concern in both the manufacturing and service sectors, as many firms continue to find it difficult to recruit "highly qualified" candidates for strategically important positions within their organizations "because there is not a large enough pool of qualified job seekers for these key positions," the latest report finds:

In both sectors, the percentage of firms that believe recruiting is getting more difficult remains substantially larger than the percentage of firms that think it is getting easier. However, even with manufacturing exempt and nonexempt vacancies rising less rapidly compared with a year ago, the September 2007 recruiting difficulty index (25.3) is above the level of September 2006 (22.8). Within the service sector, the September 2007 index (5.8) is far below the level of September 2006 (10.8).

The SHRM/Rutgers 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. The SHRM/Rutgers LINE indices are not seasonally adjusted.

For tables, graphs and additional information on these findings, check out the full report.


SHRM/Rutgers LINE Employment Expectations Report for October 2007, report and key findings

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