First-Quarter Hiring Outlook Dips Slightly

The survey, which is conducted on a quarterly basis, polls 14,000 U.S. companies about hiring intentions for the coming months. A seasonally adjusted net 17% of employers plans to increase hiring during the first three months of 2008 — down from a net 19% for the year-ago period — and the lowest percentage in four years, according to Manpower. The reasons for the slight curb in hiring are probably the usual suspects: higher energy prices, the subprime mortgage crisis and overall concerns about a looming recession. But the survey doesn't ask why employers are increasing, decreasing or maintaining their staffing levels, just if they plan to do so.

Jonas Prising, president of Manpower North America, says employers are expressing a cautious outlook, one that reflects a creeping job growth slowdown that's been occurring over the past couple of years. "You can still detect a trend that's been going on for six to seven quarters of a steady softening," he says.

Of course, some sectors are more promising than others. According to the survey, service industries like retail, mining and transportation expect a slight uptick in hiring, while employers in manufacturing and construction report a decline in hiring confidence. The categories are in effect offsetting each other, Prising says, resulting in an unemployment rate — at 4.7% in November — that's been relatively steady.

SmartMoney.com: What's the general employment outlook for U.S. companies for the beginning of 2008?

Jonas Prising: You could see that the employers are still predicting a relatively stable hiring trend. We go from the August labor report is complete disaster, and to November, saying it's OK.... The employers are saying, when I look forward, I think I'm going to be a little more cautious than I was last year but I don't think I'm going to stop [hiring]. I'm going to be more sophisticated, more cautious.... It's not an abrupt change in behavior.

What you also see is reflected in the labor numbers, you see this is true in some sectors — the service sectors are doing better, the goods-producing sectors are doing worse. The employment surveys over the last two years, on the whole, are still steady on a quarter-by-quarter basis. You can still detect a trend that's been going on for six to seven quarters of a steady softening. Hiring has been shifting down gently. I think over time, employers have become more cautious. I think that last quarter outlook for Q1 is the same — [seasonally unadjusted] 22% of them expect to increase work forces. So the net outlook is a little softer than what we had last year.

What I like about the employment survey we do with thousands of employers is it seems to be correlated with what then turns out to be the reality of the labor market when we get the numbers [from the Department of Labor]. When I looked ahead at Q4 in August and the beginning of September, most of the questions were: You're saying we're steady going, but we've just had this disaster. I can say employers looking forward aren't seeing a radical shift. It turned out to be correct; the August numbers were corrected. But it has been a gradual softening.

The Q1 outlook from the employer perspective is a continued softening trend but not a dramatic change. It's not particularly good in the context of the trend. But I think it's not bad news when you see what's happening in the labor market in general.

SM: Where are the most job growth opportunities?

JP: The service part of the economy continues to generate job opportunities and continues to be strong. If you're in service-related industries, I think the outlook is still very solid. For example, retail, restaurants, health care, providers of services. That demand is still going strong. For talent in those areas, depending on the skill levels, you are still faced in some places with shortages. On the other side, the part of the economy that's durable goods [and] manufacturing is having a much tougher time. The question is whether this is going to be a continuation.... The unemployment rate [4.7%] is still very low. Job creation, even though it's softer than two years ago, is still good. As you dig in to this, and look underneath, this is only an average.

SM: What's behind the average numbers?

JP: The average consists of the goods-producing sector of the economy that's really having a tough time. We've been shedding manufacturing jobs for three to four years straight. The services sector is expanding. I think as I look at this, I'm wondering, is this a structural change? It doesn't indicate that suddenly everyone will stop hiring. And if you look at the retail numbers, it doesn't look like everyone will stop shopping.

You have two different parts going in opposite directions. And I think it's true in terms of what kinds of skills that are needed. An average tells you unemployment rates are reasonably low, and wage inflation is under control, and quite low. But the reality is the requirement of companies to find skilled talent and the difficulty in finding that talent is quite strong. The unemployment rate for higher-skilled professionals is quite low. The low-skilled labor, depending on what sector you're in, is having a much tougher time. Wages are not rising. Unemployment rates among less skilled talent is higher than average. They're sort of offsetting each other.

The trend is that companies are increasingly utilizing technology that requires a higher degree of skill than they had in the past. As a job entrant today, you need to meet those skills.

SM: Is there any indication that salary levels will increase or decrease significantly over the next year?

JP: In the run-up to the 2000 boom and bust cycle, you saw a big run-up of salaries at very rapid rates. In the end it all came crashing down again. I think companies today are much smarter in terms of how they engage talent. They can find talent somewhere else, in other parts of the world. I don't think we'll see these extreme wage increases we've seen in the past. Through technology and globalization you can offset that.

SM: What would trigger a broader job growth slowdown?

JP: The question would be if the structural differences in job creation became broader and more cyclical. So the service economy would get infected by housing issues, subprime issues.... If all that drifted into the consumer area and people started being more careful with how they spent their money.... That would potentially trigger a slowdown and companies would scale back hiring. I think it's too early to feel the real effects of the baby boomers retiring. If it happens now, we are still ahead of seeing large numbers of boomers retiring. Fast forward five years and suddenly you have millions of people going into retirement. Then you get a different dynamic. There may be a slowdown, but you're looking at a demographic shortage that would be more challenging.... Then the effects on the labor market would be different. It would be good for workers.