Job Outlook: A Spark of Hope

Published on Wednesday, 16 March 2011 20:13

By Phil Gardner

The past 24 months have been dismal for graduating seniors, as the job market has nearly disappeared for many of them.

In fact, the first decade of this century has not been a boon for college graduates, as there were only four years in which the labor market for new graduates was strong; in the other six years employers actually reduced the available opportunities. So, this year’s projection of a 10% expansion in the opportunities for seniors provides a spark of hope that a more resilient labor market is in the offing. While concerns exist about the depth of this apparent recovery, seniors who have started their job search early in the fall term, making connections with employers, should find success with their efforts, as hiring has been very active during the first four months of the school year. Spring could bring a much more competitive market with fewer opportunities. Everything hinges on when employers who remain uncertain about the direction of the economy decide to begin hiring. The following review of the findings from Michigan State University’s annual Recruiting Trends college hiring study, based on responses from over 4,700 employers, provides details on the current hiring situation facing college seniors.

Framing the Situation

In the fall (September and October) months coinciding with the collection of data used in Recruiting Trends, other observers of employment activity were making predictions about job growth for the next several months. Office Depot’s Small Business Index showed that small business owners were more optimistic, but despite expectations that sales and revenues would be increasing, less than half were expecting to increase hiring. Manpower’s Employment Outlook strengthened sharply during the second quarter, but third quarter data revealed a more subdued picture, with less vigorous hiring expected during the fall.

The most-watched numbers come from the Bureau of Labor Statistics. The monthly jobs figures have moved up and down all year, depending on the swings in public and private sectors. Early summer witnessed the loss of jobs as census workers finished their work. Private jobs improved by 170,000 in October, raising confidence that the job market was finally picking up momentum, only to be dashed by terrible numbers in November. The more stable Job Openings and Labor Turnover Survey (JOLTS) painted a slightly more positive picture in October, with 3.2 percent of workers starting jobs compared to 3.1 percent leaving their jobs.

These various reports provide a context for interpreting the figures provided by employers who responded to the Recruiting Trends survey. The college labor market represents only a small segment of the total labor market. While college hiring can behave differently than the general labor market, interpretation of these results needs to be made in light of the total situation.

Employer Outlook

Employers are, guardedly, more optimistic about the labor market this year than last year. The ten-year trend (gauged using a scale of 1=Poor to 4=Very Good) illustrates that the current situation has not deteriorated so much far as it had in the early years of the 00s decade. There is a perception, in fact, that the outlook has improved to “Fair” this year.

A number of factors could be shaping employers’ intentions to hire this year. Stimulus factors (including government spending, credit availability, and economic growth), competition (from Europe, Asia, and through mergers and acquisitions), and even the wildcards of Boomer retirements, health care costs and government entitlement debt all dampened the labor market to a degree, but really did not seem to influence those who were hiring this year. Factors more likely to improve the climate for hiring included organizational spending on technology and facilities, alignment of hiring with overall workforce plans, and productivity improvements.

Uncertainty among employers, who are still concerned about the strength and longevity of the economic recovery, underlies the rising confidence in labor market activity expressed in the figure above. Among employers who hired a college graduate last year and have some form of hiring targets, 31 percent remain uncertain as to the number of hires they will make this year and, more importantly, when they will be able to hire. Forty-four percent of respondents who did not hire a graduating college student last year but are anticipating hiring this year remain uncertain about the actual number of hires to be made and whether they will be able to make these hires during this academic year. Uncertainty serves as a strong counterweight to rising confidence, holding back employment recovery. Both factors are shaping this year’s market.

Hiring

On the basis of the complete hiring figures provided by more than 3,700 employers, the college labor market is poised for a rebound, especially at the bachelor’s level. Overall hiring across all degree levels is expected to increase modestly, as illustrated in the following chart. Employers appear to be cutting back on hiring from the credentialed segment of the talent pool and moving up the degree pipeline to associate and bachelor’s candidates now that they think they can afford the higher salaries and can more effectively use their skill sets. Associate degrees are still slightly depressed because of continued shrinking in mid-size manufacturing, engineering and related employers.

Solid expansion is expected at the bachelor’s level, with 10 percent increase in job opportunities compared to last year. This growth may seem large, but it is a baby step toward recovering the job opportunities lost since the recession began in the fall of 2008, estimated to be between 40 and 50 percent of opportunities available at the start of the 2008 recruiting season. MBA hiring is also scheduled to improve this year. Our tale is cautionary for both these degrees, because the average percentage changes reported in this section mask some underlying structural oddities in the labor market -- a topic we will address in the next section.

Advanced degreed graduates can expect a mixed bag of opportunities. The situation is actually improving slightly for master’s graduates (all programs except MBA) because of increased hiring activity for accountants, an area that took a noticeable dip last year. Doctoral graduates, especially with science, engineering and business degrees, will find increased opportunities outside academe among small, fast-growth companies focusing on scientific research, high-level engineering design, investment and management consulting. Professional degreed graduates will face a weakened job market, primarily because hiring of law graduates continues to shrink, and because of the end of stimulus funding that supported social assistance programs.

Hiring Outlook for 2010-2011 by Degree Level

• Associate -6%
• Bachelor’s 10%
• MBA 10%
• Master’s -2%
• Ph.D. 5%
• Professional -13%
• Credentials -30%
• Total 3%

 

The Rest of the Story

Paul Harvey always broke mid-story for a commercial, returning with “the rest of the story.” Our story really begins with a closer look at the distribution of hiring change year over year for bachelor’s degree graduates. The majority of respondents are clustered around the zero point (no change in hiring) with more employers adding a few jobs than employers shaving off a few jobs. Considering only these respondents (about 88% of the respondents), bachelor’s hiring would only be up a modest 3 to 5 percent. There is a cluster of employers (approximately 400) who are one standard deviation or more from the mean. The best way to describe the situation is through the rocket ship lava lamp in the accompanying picture. The blob lying at the bottom of the lamp represents the group of employers who are approaching the labor market with caution, making necessary hires only or still uncertain about their hiring. The two blobs that have risen to the top represent the outliers on our distribution curve.

One important observation drawn from this illustration is that there are no coattails. In other words, employers who have separated from the pack are not pulling other employers along with them. What separates these two groups of employers from the others is simply that they are more positive about the economy. They expressed more confidence in their position in the economy, felt they had access to needed credit or had internal financial resources to fund expansion, believed global and domestic markets favored them at this time, and did not feel constrained by economic wildcards, especially health care costs and retirements. They tended to have workforce succession in place that aligned hiring needs with available assignments. The two groups can be further described as follows:

Group 1: Large employers (make up more than 50% of this group)

• Hiring, on average, 220 individuals per company; a 37 percent increase over last year.
• Primarily from manufacturing, financial services, professional and scientific services, and the federal government
• Positions being filled have been carried over from previous years and were frozen during the last year.

Group 2: Small employers (make up nearly 60% of this group)

• Hiring, on average, 21 individuals per company; nearly 250 percent increase over last year (a doubling of their workforce).
• Primarily from manufacturing, financial services, professional and scientific services, and non-profits (nationally based).
• Jobs being offered by these employers are mainly newly created positions.

The situation at the MBA level is very different. We have a perfectly bimodal sample. This means that the same number of employers indicated that they would increase MBA hiring (44%) and decrease their MBA hiring (44%). Fortunately, the hiring companies are increasing opportunities at rates that off-set decreased opportunities among the other group of employers. Overall, the market will improve by 10 percent. Large companies are more likely to be expanding opportunities, especially those in manufacturing, banking (yes, investment banks are back!), and management consulting services. This expansion, however, will not generate enough opportunities for the number of students graduating with MBAs this year. MBAs should expect a very competitive labor market this year.

Timing

I was talking to a class of seniors (mixed majors) prior to the November release of Recruiting Trends and asked how many had started their job search. Of those not planning on graduate school, only 4 or 5 had actually started their search. Some told me they planned to start after the holidays or in the spring when they thought that the labor market might improve. Making a connection with an employer is really a matter of timing; this year timing is everything. Many of the employers who were hiring, especially those in Group 1, reported that their hiring would be done by November. They would only be back on campus in the spring for interns and possibly full-time positions not filled from their internship and co-op program. In following up with several contributors to this survey, they confirmed that, indeed, they had completed their hiring by Thanksgiving. The message here is that available positions will be obtained by seniors who started early and aggressively pursued their job searches. For those who decided to wait until winter or spring terms, the competition will be fierce for those jobs offered to new graduates.

Last year, nearly one-third of respondents indicated that they would be hiring in the spring. And they showed up on campuses shortly after spring break. This year fewer employers indicated that they would be active in the spring. For college recruiting to remain active through the next six months, those employers who perceive high levels of uncertainty have to come off the bench and become active in recruiting seniors.

Targeted Hiring

Respondents were asked to indicate the types of institutions where they typically recruited new talent. Approximately 18 percent recruited at Historically Black Colleges and 13 percent at Hispanic-serving institutions. These employers were generally larger employers who averaged 85 to 100 hires per company (a 9 percent increase over last year). Students at these schools will be presented with opportunities, but, again, the competition for these positions will be fierce.

Regional Hiring

The college labor market along the West Coast seems to be lagging behind that of the other sections of the country. Employers reporting from the Mid-Atlantic states (Washington, DC to New York) continue to display a stronger labor market than that of the rest of the country. The Midwest is making a strong recovery, up 13 percent this year after facing more years of difficult hiring than the rest of the country. The states across the southern part of the country seem to be moving ahead steadily.

Bottom Line

We found more optimism in this year’s hiring report, which is borne out by the strong advance in the labor market. However, caution is warranted. The market is being driven by a handful of employers who do not seem to be pulling other employers along with them. Hiring activities are proceeding quickly, as employers were doing most of their recruiting during the fall. In the winter and spring terms, seniors who are still seeking employment or just beginning their job searches need to be:

DIRECTED (know where you want to go)

FOCUSED (concentrate on employers for whom you can offer the best value)

CONNECTED (use your networks to access information about emerging job opportunities)

The Recruiting Trends 2010-2011 report can be downloaded at www.ceri.msu.edu.

Phil Gardner is Director of the Collegiate Employment Research Institute at Michigan State University.

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