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Hiring Forecast Less Grim But Wages Fall

Service sector is hardest hit by falling pay

May 13, 2009
People who are lucky enough to land a job during the recession are taking home smaller paychecks.

The Society for Human Resource Management reports that the service sector is the hardest hit. More than 12 percent of companies cut wages and reduced benefits packages offered to new hires in April. The same thing happened in 2.3 percent of companies in the manufacturing sector.

The numbers mark the first time in the four-year history of the society's LINE Employment Report that new-hire compensation growth is negative, or decreasing.

"Companies are turning to wage cuts and benefits reductions to control lingering operating costs," said Jennifer Schramm, manager of workplace trends and forecasting. "The massive hiring freezes and layoffs seen across the country have not remedied all cost issues for companies struggling to survive the recession."

A substantial decline in new-hire compensation may indicate downward pressure on overall wage growth. A decline in wages would be another hardship for workers in an economy that is not expected to improve until the fourth quarter of 2009, according to Federal Reserve estimates.

There is some good news, though. The LINE Employment Report projects slight improvement in May employment as more manufacturing and service sector employers report plans to hire than in previous months.

However, the report forecasts a 34.8 point drop in manufacturing sector hiring and an 18.1 point decline in service sector hiring compared with May 2008.

In the manufacturing sector, 21.6 percent of HR respondents will hire workers while 26.4 percent will reduce their work force, for a net total of 4.8 percent in job cuts. The percentage planning to hire is the highest seen in manufacturing companies since October 2008.

Service sector hiring is also up with 32.9 percent of HR professional reporting plans to hire -- the highest seen since November 2008, while 15.5 percent will eliminate jobs for a net total of 17.4 percent that will add jobs.

"With historic numbers of people out of work, HR professionals in both sectors report little difficulty in recruiting top talent," said Schramm.

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