Survey highlights regional employment trends
We continue to investigate the path of future employment trends, looking in particular at the hiring plans of our business contacts in the Southeast (of course, those firms could have staff based in other areas outside the region) to complement our analysis of labor market data. Along those lines we reached out to our Regional Economic Information Network earlier this month and asked a series of questions about their employment plans. We also asked about their expectations for wage and benefits increases. A summary of the 456 responses are below. We also make some comparisons to a similar survey we performed in January 2011.
The first question was pretty straightforward: Do you expect your firm to increase, decrease, or stay the same from an employment perspective in 2012? Just under 47 percent of survey respondents said that they expected to increase payrolls over the next year. These results compare favorably to January 2011, when just under 40 percent anticipated higher payrolls for the year. Just over half of the businesses we contacted last January said they expected to keep employment levels unchanged in 2011. In January 2012 that number had declined to 43.6 percent. Just under 10 percent of respondents expect to cut payrolls in 2012, the same reading we found in January.
The next chart probes deeper into the factors behind plans to increase employment. The leading reason remained that expected growth in sales was high among the businesses surveyed. The idea that current staffing levels were either too low or that current staff were either overworked or did not possess needed skills was also noted by many survey participants. Only one in 10 respondents said that the decrease in economic or financial uncertainty was a reason for their plans to increase hiring—but this is an improvement from January 2011 when only one in 20 registered that view.
We also asked what restraints to hiring exist. The need to keep operating costs low was cited as the most important factor. Since we did not include this option in our January 2011 survey, we can't make comparisons to what respondents said a year ago. Weak sales outlooks and policy uncertainty were also cited as important restraints to hiring.
Lastly, we asked about wage and benefit costs increases in 2012. Wage expectations appeared limited, as only one in three survey respondents anticipated increases of over 2.5 percent for the year. About 40 percent of participants said they see benefits costs increasing more than 2.5 percent.
Our conclusions from our most recent survey? At least from the perspective of our business contacts in the region, hiring activity appears to be improving slowly, and cost pressures do not appear to be rising—although margins remain thin. With regard to hiring, results match up with recent trends in regional labor market data. In the last quarter of 2011, Sixth District states added a net total of 85,300 jobs, which is the strongest quarterly gain since before the recession began in 2007, apart from the Census-hiring induced gains in early 2010. In addition, unemployment rates have fallen to their lowest levels since mid-2009 for most Sixth District states.
On the subject of cost pressures, we'll be digging into this issue and broader regional price trends through our new Business Inflation Expectations (BIE) Survey. The BIE measures the inflation expectations of regional firms and their current business conditions. Besides identifying the sources of cost pressures, the survey provides insights regarding businesses' pricing decisions.
By Mike Chriszt, an assistant vice president in the Atlanta Fed's research department
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