Be Prepared for a Little More Competition

College seniors over the past several years have been greeted by healthy labor markets. It took several years after the college labor market crashed in January 2001 to regain its health. However, the last two years were witness to expanding opportunities between 12 percent and 16 percent. Many have anticipated a strong market for the class graduating in 2006 and 2007. The college career fairs are packed with employers, employers are requesting more on-campus interview schedules, and Internet job services boast of record numbers of listings. With expectations running high, many observers were surprised when the results from Michigan State University's annual recruiting survey indicated that overall employment opportunities would expand by only 5 percent this year.

What's the story?

This article reviews the findings from Recruiting Trends 2006-2007 recently released by MSU. Readers will encounter an interesting situation, something statisticians call a bimodal distribution, in which we have two groups of employers behaving very differently in the market. One group (42 percent of the sample) is increasing hiring at a significant pace while another equal-sized group is decreasing hiring at a significant pace. Fortunately, those employers who will be hiring will do so at a greater rate than employers are decreasing their hiring from last year.

Labor Market Outlook

Optimism about the strength of the college labor market reached the highest level since 1999 and 2000, based on ratings provided by employers. The following graph shows that the 2006-07 average of 3.29 (good to very good) compared favorably to the robust labor markets of the late 1990s. This optimism was shared by numerous economic sectors, including retail, health services, construction, and finance and insurance. The manufacturing, information and arts respondents were not quite as positive.

Various factors were shaping the labor market this year, including the fall elections, as well as the upcoming 2008 presidential election, the cost of doing business, and economic shifts in the economy. Uncertainty slows and may even stop employers from hiring, and the fall elections interjected plenty of uncertainty. Employers were concerned about political action in areas such as immigration, taxes, and trade that may impact their ability to remain competitive. Costs related to doing business have risen, especially health care, cost of living adjustments, and costs for supplies and materials. Fortunately, inflation has remained manageable and energy prices have abated, allowing employers to consider hiring. The biggest concerns center on the slowdown in housing and retail. The housing sector, including mortgage refinancing and construction, has driven much of the economic growth during the past five years. The contraction in this sector is expected to ripple to other sectors that supply inputs (windows, insulation, and equipment) to housing. Retail, a driving force in the expansion of opportunities over the past three years, is pulling back. Consumer spending has been cautious in recent months, a trend that has retailers anticipating less growth in the next year.

Two factors caught our attention. First, employers reported the availability of experienced labor in the market that was more appealing than inexperienced college graduates. The second factor is the attitude of new college graduates.

Regarding the labor supply, there are three contributing sources: (1) dislocated labor from manufacturing and other businesses that have been downsizing or outsourcing production; (2) recent graduates who entered the workforce when the availability of opportunities was limited and who are looking for new positions; (3) and new retirees who really do not want to leave the workforce.

Employers find these individuals attractive because they are easier to train, can quickly contribute to the company's bottom line, and are more committed to working.

This connects to the second factor - the attitude of new college graduates. As one respondent said, "Culturally, this generation feels a sense of entitlement, and we are seeing a trend in lack of dependability and effort to strive for excellence in every task, not just those that are important."

Hiring Intentions

More than 50 percent of respondents indicated that they had definite plans to hire college graduates this year. Another 20 percent had made preliminary plans to hire college graduates this year. About 23 percent were still uncertain about their hiring at this time due to uncertainty in the economy.

The real question is whether the hiring indicated by employers will increase, remain at the same level, or decrease from last year. By comparing this year's hiring levels with the actual levels from last year, we can identify the number of firms and organizations that will increase or decrease hiring. It is this calculation that produced a bimodal grouping of employers. The number of employers increasing their hires is offset by an equal number who are decreasing hiring, with only a few firms remaining at the same level as last year. Approximately 42 percent will cut the number of positions they will attempt to fill compared to last year. The level of cuts will range from 1 to 450. Forty-two percent will add more positions compared to last year. The number of positions to be added range from 1 to 2,525.