Latest LINE survey shows labor market remaining soft in May

April 22, 2008

The latest SHRM/Rutgers Leading Indicators of National Employment® (LINE®) survey indicates that similar to last month, the labor market in May 2008 will remain soft and will be much weaker than a year ago. Employment expectations are down sharply in both the manufacturing and service sectors.

Compared with May 2007, the employment expectations index dropped 13.2 points for manufacturing and 16.5 points for the service sector in May 2008, indicating that far fewer new hires will be made next month.

Within the manufacturing sector, the new-hire compensation index dropped from 10.0 in April 2007 to 7.8 in April 2008. Within the service sector, the index is slightly lower than it was a year ago (12.6 in April 2008 compared with 13.0 in April 2007).

Within the manufacturing sector, the April 2008 exempt vacancy index is much lower than the April 2007 rate (9.4 compared with 16.3) and the April 2008 nonexempt vacancy index is substantially lower than the April 2007 level (12.5 compared with 17.2). In manufacturing, the decline in these indices is due to the smaller number of responding organizations reporting increasing vacancies of exempt and nonexempt employees. The number of responding organizations reporting decreasing exempt and nonexempt vacancies has dropped since last year.

Within the service sector, the exempt vacancy index dropped by half, from 7.0 in April 2007 to 3.3 in April 2008, and the nonexempt vacancy index dropped from 27.0 to 11.4 during the same time period. In this sector, the drop in both exempt and nonexempt vacancy indices reflects both a decline in the percentage of HR professionals reporting increasing vacancies and a rise in the percentage of those reporting decreasing vacancies. The recruiting difficulty index for the service sector is at the lowest April level since the series was initiated in 2005.

Exempt vacancies are vacancies 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).

Within both the manufacturing and service sectors, the recruiting difficulty index is at its lowest level in years. Nevertheless, many firms continue to report difficulty in recruiting "A" candidates for a number of key positions within their organizations.

While the percentage of manufacturing firms that believe recruiting is getting more difficult remains larger than the percentage of firms that think it is getting easier, the April 2008 recruiting difficulty index for manufacturing dropped substantially compared with April 2007 (6.3 and 18.3, respectively). In the service sector, the recruiting difficulty index also fell during this time period (-10.5 compared with 16.4), and more firms reported that recruiting difficulty had decreased (20.9 percent) rather than increased (10.4 percent).



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