February Job Market Shows Slowing Employment Growth

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Five-week outlook shows employers plan to increase new-hire compensation.

According to new numbers from the Leading Indicator of National Employment® (LINE™) report, there will be more hiring in manufacturing and less in services in February 2007, compared to February 2006. The findings are reported in the February report of the LINE™ index, a collaborative effort between the Society for Human Resource Management (SHRM) and the Rutgers University School of Management and Labor Relations.

This LINE™ employment expectations report references the same February period as the report the Bureau of Labor Statistics (BLS) will release on March 9, 2007.

Despite the major decline in overall job vacancies, firms continue to face considerable difficulty in finding highly qualified applicants to fill key positions. Within both the manufacturing and service sectors, recruiting difficulty continues to be a major concern and new-hire compensation in January 2007 is rising faster than it was a year ago. The responses to the January SHRM/Rutgers LINE survey suggest that the tightening labor market is forcing more firms to increase starting wages as a way to attract more qualified job applicants.

The indicator reports on four employment measures: job expectations, job vacancies, new-hire compensation and recruitment difficulty. The LINE™ employment expectations index has consistently provided an early indication of the upcoming BLS numbers. The LINE™ "net increasing index" is calculated by taking the percentage increasing minus the percentage decreasing. The figure below shows how the LINE™ employment expectations index, in red, has correlated with the BLS numbers, which come out five weeks later. To view the full report, visit http://www.shrm.org/LINE.


Overall vacancy growth has slowed considerably within the manufacturing sector, but manufacturers still face substantial difficulty in filling open positions. Slightly more manufacturers expect to expand their workforces in February 2007 than in February 2006 (56.5 percent versus 52.5 percent). Potentially attributed to seasonality, employment expectations within the manufacturing sector climbed from 28.2 in January to 46.3 in February. The February 2007 index (46.3) is above the level of February 2006 (41.4). For exempt employment, the most significant difference between 2007 and 2006 is the percentage of manufacturers reporting fewer vacancies. That percentage rose from 8.0 percent in January 2006 to 17.2 percent in January 2007. On a year-over-year basis, manufacturers experienced much slower growth in nonexempt vacancies. The nonexempt vacancy index declined from 17.4 in January 2006 to 3.8 in January 2007. The January 2007 recruiting difficulty index (21.8) is above the level of January 2006 (17.0).


More service sector firms expect to reduce their workforce in February 2007 than in February 2006 (18.7 percent versus 11.4 percent). Opposite of the usual seasonal pattern, the employment expectations index within the service-sector declined between January and February (41.6 to 26.5). In contrast to the manufacturing sector, the percentage of service-sector firms reporting fewer exempt vacancies declined from 10.6 percent to 7.1 percent. Service-sector firms experienced slightly faster growth in nonexempt vacancies. The nonexempt vacancy index increased from 21.2 in January 2006 to 23.2 in January 2007. The January 2007 recruiting difficulty index (4.8) is below the level of January 2006 (7.9).

The LINE™ index is an economic indicator that identifies early economic trends and changes in the national job market by surveying human resource (HR) executives at manufacturing and service-sector firms. The indicator is released at 8:30 am ET on the fourth Tuesday of each month.

The Society for Human Resource Management (SHRM) is the world's largest association devoted to human resource management. Representing more than 210,000 individual members, the Society's mission is both to serve human resource management professionals and to advance the profession. Founded in 1948, SHRM currently has more than 550 affiliated chapters within the United States and members in more than 100 countries. Visit SHRM Online at http://www.shrm.org.

The School of Management and Labor Relations at Rutgers, the State University of New Jersey, is a leading center of scholarly and applied research on human resource management issues. The school creates and disseminates knowledge that fosters a better understanding of the nature of employment and work in modern society. The Rutgers Master of Human Resource Management degree is one of the top human resource management programs in the nation.


Jeanene Harris 703-535-6356

Will Gray 703-535-6012

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