Hotter Economy can Spark Retention Challenges
Although a recent report on U.S. job growth has left many observers disappointed, other economic signs are prompting employers to re-evaluate their benefits and retention strategies to avoid a potential talent exodus.
The Department of Labor reported that the nation added 120,000 jobs in March, down from the previous three months that saw 200,000 or more new jobs. Still, the stock market is up for the year, and U.S. employees appear to be more secure in their jobs. The Randstad employee confidence index -- which measures how confident workers feel about their job security and the economy -- rose in March to the highest level since October 2007, according to Workforce magazine.
An improving economy, however, has a dark side: Talented but unhappy employees will seek better opportunities elsewhere, experts say.
"There is a storm brewing," said Lynne Sarikas, executive director of the MBA Career Center at Northeastern University, in a recent Human Resource Executive online report. "Many people will be looking to make a change once they perceive improvement and stability in the job market. This will have a significant impact on their employers."
More movement in the job market can spur hotter competition among employers for good talent. In addition to competitive wages, robust employee benefits can help employers keep their best workers happy and productive -- and employers are taking notice. A recent study by MetLife found that 90 percent of companies say they don't plan to cut employee benefits in the near future, according to a report by CCH. A large majority (91 percent) of those polled expressed confidence that benefits work as retention tools.
While health, dental, vision and other stalwarts in the retention toolbox remain central to many companies' overall offerings, employers may want to consider additional choices to sweeten the benefits pot.
For instance, companies that want to pull in younger workers may want to investigate defined benefit (DB) retirement plans, according to new research. A recent study by Towers Watson, reported in PLANSPONSOR, noted that 63 percent of workers younger than 40 said in 2011 that they chose their current employer because it offered a DB plan, compared with only 28 percent in 2009.
Education benefits are paying off for some companies, as well. United Parcel Service is sponsoring a program that pays up to $3,000 per year in tuition reimbursement for part-time employees. Executives say the program has spawned talented leaders who have stuck with the company.
"Enhancing the skills and knowledge base for our employees is a fundamental element of our success, and correlates directly with our policy to promote from within," Susan Rosenberg, UPS public relations manager, told the Atlanta Journal-Constitution.
Economy recovering, but not accelerating
BY PAUL WISEMAN
WASHINGTON (AP) — The U.S. economy's recovery looks enduring. It's just not very strong.
Hiring, housing, consumer spending and manufacturing all appear to be improving, yet remain less than healthy. Economists surveyed by The Associated Press expect growth to pick up this year, though not enough to lower unemployment much.
A clearer picture of the nation's economic health will emerge Friday, when the government reveals how many jobs employers added in April.
"The outlook is for continued moderate growth," John Williams, president of the Federal Reserve Bank of San Francisco, said in a speech Thursday. "Nonetheless, we have nearly 4½ million fewer jobs today than five years ago, and the unemployment rate remains very high at 8.2 percent."
The 32 economists polled by the AP late last month are confident the economy has entered a "virtuous cycle" in which more hiring boosts consumer spending, which leads to further hiring and spending. They expect unemployment to drop from 8.2 percent in March to below 8 percent by Election Day.
But they still think the rate won't reach a historically normal level below 6 percent until 2015 or later. And they predict hiring will slow the rest of this year from a relatively brisk December-February pace.
The government's economic data have been sending mixed signals about the health of the recovery from the Great Recession. Here's a look at the economy's vital signs:
— JOBS
The job market is gradually improving, though not as fast as it had been. From December through February, employers added a strong 246,000 jobs a month. That figure sank to a weak 120,000 in March. The April jobs report could clarify whether March was a one-month dud — or evidence of a more lasting slowdown in job creation like the one that occurred in mid-2011.
The economists in the AP survey foresee average job growth of 177,000 a month from April through June and 189,000 for the next six months. The economy needs to generate about 125,000 jobs a month just to keep up with population growth.
On Thursday, the government said the number of people who applied for unemployment benefits last week fell by a sharper-than-expected 27,000 to a seasonally adjusted 365,000. That pointed to fewer layoffs and a brighter outlook for hiring.
Further cause for hope came in a government report Thursday on worker productivity: It fell from January through March by the most in a year. Declining productivity could be a positive sign for jobseekers. It may signal that companies are struggling to squeeze more from their workforces and must hire to keep up with customer orders.
— HOUSING
The housing market has been a dead weight on the economy. The single-family home market, in particular, is still struggling. House prices dropped for six straight months through February, according to the Standard & Poor's/Case-Shiller home-price index. And Americans bought fewer previously owned homes in March.
The economists polled by the AP worry that the lingering effects of the housing bust are slowing the economy's expansion. They say growth can't accelerate until national home prices finally hit bottom.
Still, spending on home construction and renovations rose from January through March by the most in nearly two years. And housing investment, led by apartment construction, is expected to contribute to economic growth this year for the first time since 2005.
The warm winter may also have led more people to buy earlier in the year, essentially stealing sales from March. Reduced prices, record-low mortgage rates, higher rents and the improving job market appear to be emboldening would-be buyers. Many seem to have concluded that prices won't drop much further, if at all.
And builders are laying plans to construct more homes in 2012 than at any other point in the past 3½ years.
— CONSUMERS
Americans have proved surprisingly willing to spend in the face of a wobbly economy. In the first three months of the year, consumer spending grew at an annual pace of 2.9 percent, the fastest in more than a year.
Some economists doubt that consumers can keep it up. They probably can't afford to. Americans' after-tax income in the first three months rose just 0.6 percent from a year earlier. That was the skimpiest pay increase in two years. People spent more, in part, because they saved less. Economists worry that people won't keep spending more unless their income grows.
On Thursday, big retailers including Costco, Macy's and Target, reported that sales last month came in below expectations.
— CORPORATE PROFITS
U.S. companies earned more money than analysts expected from January through March. They're beating Wall Street estimates at the best rate in more than a decade. Improved earnings have propelled the Dow Jones industrial average up nearly 4 percent since April 10.
U.S. corporations excluding banks and other financial firms are sitting on more than $2.2 trillion in cash, up from $1.7 trillion in 2009. That surplus means they can afford to expand and hire whenever they're confident enough.
— MANUFACTURING
Manufacturing has provided much of the fuel for the U.S. recovery since the recession ended roughly three years ago. American manufacturing expanded last month at the fastest pace in 10 months. New orders rose to the highest level in a year, a signal of more production in coming months. Export orders also rose, despite worries that weaker economies in Europe and China could hold back U.S. exports.
And the busier factories are hiring. Manufacturers added 120,000 jobs a month through March this year, their fastest three-month pace since 1997.
But the economists surveyed by the AP think manufacturers will fill jobs more slowly the rest of the year. If so, that could weaken overall job growth.
US hiring slows sharply
Employers only added 115,000 in April
BY CHRISTOPHER S. RUGABER
WASHINGTON (AP) — U.S. employers pulled back on hiring in April for the second straight month, evidence of an economy still growing only sluggishly. The unemployment rate dipped, but only because more people gave up looking for work.
The Labor Department said Friday that the economy added just 115,000 jobs in April. That's below March's upwardly revised 154,000 jobs and far fewer than the pace earlier this year.
The unemployment rate dropped to 8.1 percent last month from 8.2 percent in March. It has fallen a full percentage point since August to a three-year low. But last month's decline was not due to job growth. The government only counts people as unemployed if they are actively looking for work.
In April, the percentage of adults working or looking for work fell to the lowest level in more than 30 years. Many have become discouraged about their prospects. More than 5 million Americans have been unemployed for six months or longer, an astonishingly high number almost three years into a recovery.
Stock futures dipped after the report was released.
Employers added an average of 252,000 jobs per month from December through February, a burst of hiring that raised hopes the economy would accelerate. But job gains have averaged only 135,000 in the two months since then. That's below last year's pace of 164,000 per month.
Weak job gains pose a threat to President Barack Obama's reelection. He is likely to face voters this fall with the highest unemployment rate of any president since World War II.
Some economists attribute the weak gains partly to mild winter, which led some companies to accelerate hiring in January and February. That may have weakened hiring in March and April.
"Over the next couple of months we would expect the monthly gains to settle back into a 150,000 to 200,000 range," Paul Ashworth, an economist at Capital Economics, wrote in a note to clients.
But others are concerned that this reflects a genuine slowdown.
"One month can be weather related, two months of weaker than expected job growth is dangerously close to a trend," Dan Greenhaus, an analyst at BTIG, an institutional brokerage firm.
The slowdown could heighten fears that high gas prices and sluggish income growth are weighing on the broader economy.
Economists noted that the job gains are consistent with the 2.2 percent annual growth in the first three months of the year. Faster growth will be needed to accelerate hiring.
The economy must create at least 125,000 jobs a month just to keep pace with population growth. It generally takes twice that number on a consistent basis to rapidly lower the unemployment rate.
Average hourly wages rose a penny in April, to $23.38. They have increased 1.8 percent over the past year, trailing the rate of inflation.
Manufacturers, retailers, and hotels and restaurants all added workers. So did professional services such as engineering and information technology. Shipping and warehousing firms, construction companies, and governments cut jobs.
Hiring in February and March was revised up to show additional job gains of 53,000.
There have been other signs that hiring will improve.
The number of people seeking unemployment benefits fell last week by the most in a year, the government said Thursday. That drop wasn't reflected in the April employment report, which was compiled from a survey taken earlier in the month. But it could bode well for hiring in May.
And earlier this week, the Institute for Supply Management, a private trade group, said factory activity grew at the fastest pace in 10 months and a gauge of manufacturing employment showed that hiring jumped.
Still, service companies expanded in April at the slowest pace in four months, according to a separate ISM survey. And the group said hiring at those companies, which employ roughly 90 percent of the work force, slowed.
The economy expanded at a 2.2 percent annual rate in the January-March quarter, down from 3 percent growth in the fourth quarter. Economists polled by the Associated Press forecast the economy will grow 2.5 percent this year. In a healthy economy, that would be considered average. But faster growth is needed to spur greater job creation.