Hiring Plans Look Strong for 2011

Jan. 24, 2011
Employment outlook hits a 12-year high

In a study by the National Association for Business Economics, the January survey "confirms that the underpinnings of the U.S. economy continue to strengthen," said Shawn DuBravac, Consumer Electronics Association. "The number of firms expressing positive hiring plans is at a level not seen in over a decade -- a sign of improving labor-market dynamics."

Employment continues to improve, with 34% of firms reporting larger workforces compared to only 13% a year ago, according to the survey. The share of firms cutting jobs shrank, from an average of 13% over the past three quarters to 6% currently. The current NRI is the highest level it has been since 1998.

The hiring outlook for the next six months also looks more robust -- 42% of respondents indicated their firms will be increasing employment, up from 39% last quarter and 29% in January 2010. The employment outlook net rising index (NRI) hit a 12-year high.

Highlights of the survey include:

  • Industry demand increased for a sixth consecutive quarter during the final three months of 2010. About 55% of survey panelists reported rising demand versus 12% reporting falling demand. All four major industry sectors experienced demand growth.
  • Expectations for economic growth have improved significantly. Over the last quarter, NABE panelists have become more optimistic. A majority (62%) assumes real GDP growth of 2% to 3% in 2011, and one in five panelists is building business plans based on an outlook of 3% to 4% economic growth.
  • Profit margins expanded for a sixth quarter in a row as 38% of panelists reported that margins rose at their firm, versus 18% who reported declining profitability. The nearly 21-point spread between the two responses was the highest since the fourth quarter of 2005.
  • The share of firms increasing their capital spending from the previous quarter rose slightly from the prior survey to 38%, while only 6% of panelists reported cutbacks in their firms. Expectations for future capital spending improved significantly, with 62% of respondents reporting higher planned expenditures, up from 48% last quarter.
  • Materials costs continue to rise. The percentage of respondents reporting rising prices outpaced that of respondents reporting price declines, but not to the percentage highs seen in 2008.
  • As for the expected impacts of the proposed 2011 tax package, more than half (53%) of the panelists, especially those from the goods-producing sector, anticipate a favorable impact on their firm's sales. In contrast, a majority of the respondents (60%) said they do not anticipate any increase or decrease in investment spending or employment in response to new tax policies.
  • More than half of the respondents indicated that some portion of their firms sales came from foreign-based operations, with 14% reporting that more than half of their sales were from foreign sources. Of those with sales from foreign operations, 44% indicated their share of sales from foreign sources increased in the last quarter, while only 2% reported they decreased.

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