LINE Forecasts Accelerating Employment Growth

By Steve Bates, Managing Editor, HRNews
SHRM Online

May 23, 2006

If you think that May has been a strong month for employment expansion, hold on. June could be even stronger, according to the latest SHRM/Rutgers Leading Indicator of National Employment (LINE) report, released May 23.

More U.S. companies expect to expand their employment in June 2006 than in any month since February 2004, when LINE was introduced by the Society for Human Resource Management (SHRM) and the Rutgers University School of Management and Labor Relations. Also, in May, the measure of the difficulty of recruiting top candidates for the manufacturing sector reached its highest LINE level to date.

LINE is an economic indicator that identifies early trends and changes in the national job market by surveying HR executives at manufacturing and service-sector firms. It reports on five employment measures, three of which are unique to LINE. Monthly LINE reports can be found on SHRM Online at www.shrm.org/line.

The LINE employment expectations index, a measure of organizations’ plans to increase or decrease employment headcount within the next 30 days, rose in both sectors, to 76.4 in manufacturing and to 79.6 in the service sector, in May. Fifty is a neutral number indicating a balance between the number of firms with expanding employment and the number of firms with contracting employment in that sector.

In April, 56.7 percent of manufacturing-sector HR professionals participating in the LINE survey said that they expected the number of workers on their payrolls to go up in the next 30 days. In May, 61.4 percent of them forecast greater headcount in the coming 30 days.

In the service sector, 56.8 percent of companies said in April they expected to add headcount. In May, however, a whopping 66.0 percent of organizations said they planned to add to their payrolls, while 27.2 percent forecast no increase and only 6.8 percent expected a decrease in payroll count.

“The record jump in employment expectations indicates that an increasing number of organizations could be facing a shortage of qualified candidates in some sectors,” said Jennifer Schramm, SHRM’s manager of workplace trends and forecasting.

The overall measure of talent recruiting difficulty reached a record 66.0 in May for the manufacturing sector. “At this point in the economic recovery,” wrote Steven Director, a Rutgers University economist, in the May SHRM/Rutgers LINE report, “manufacturers are finding it increasingly difficult to recruit highly qualified individuals to fill those positions that are of greatest strategic importance to their firms. There is no longer a large pool of qualified job seekers to take open positions.”

While about one-third of manufacturing companies reported an increase in the difficulty of recruiting “A” candidates for “A” positions and 65.2 percent reported no change in May, only 1.4 percent said difficulty of recruiting top talent was decreasing.

In the service sector, recruiting difficulty eased in May; almost 84 percent of employers reported no change or a decrease in recruiting difficulty in that sector.

Despite the expectations of increased hiring in both sectors and the difficulties in recruiting in manufacturing, employers are not facing much additional pressure to increase new-hire compensation, the LINE statistics for May indicate. Wages and benefits tend to rise during periods of economic expansion, but the May 2006 diffusion index for new-hire compensation in the manufacturing sector was nearly unchanged from the April index. Only 13.8 percent of manufacturers said they have increased new-hire compensation in the past month, and only 10 percent of service-sector employers raised new-hire compensation.

“There is no evidence of widespread wage inflation,” according to the May LINE report.

The index for vacancies in nonexempt positions for the manufacturing sector was also little changed in May from its April level. However, the count was more volatile in the service sector, where the number of companies with vacancies in nonexempt positions rose from 28.9 percent in April to 42.4 percent in May.

Total vacancies in May showed an increase in the service sector as well while declining in manufacturing.