Confidence In Economy Resulting In Bullish Hiring Projections

February 9, 2017 – Another survey seems to continue to defy imagination, given President Trump’s tumultuous first three weeks in office. But according to Express Employment Professionals’ hiring trends survey, a full three quarters (76 percent) of North American businesses plan to hire more workers during the first quarter of 2017. Only nine percent plan to eliminate positions.

The results are a slight improvement from the fourth quarter of 2016, when 72 percent said they planned to hire, and from the first quarter of 2016, when 69 percent said they planned to hire. “These are certainly positive signs,” said Bob Funk, chief executive officer of Express. “More businesses are planning to hire, and only a fraction are eliminating positions.”

This report follow the first Department of Labor jobs report under President Donald Trump, which saw the U.S. add 227,000 jobs last month as the U.S. unemployment rate stood at 4.8 percent.

The National Association for Business Economics’ business conditions survey indicates employment conditions moderated in recent months as 61 percent of respondents indicated hiring at their companies was unchanged during the past three months. Expectations for employment in the next three months were also roughly unchanged.

Select the Right Search Firm
Find out why CHROs and talent acquisition leaders turn to Hunt Scanlon’s Industry Media Center for the latest news and updates on executive search firms around the globe. Become a new member today.

The report found that despite indications of slower wage growth at the end of 2016, expectations for wage increases over the next three months are notably stronger than in recent surveys. Fifty nine percent of respondents expect wages to rise over the next three months, a 19-percentage point increase from the share reporting wage increases in the past three months, and a slightly larger percentage from one year ago.

Bullish Hiring Projections

“Although profit margins remained flat, sales growth is becoming more widespread, and firms expect to achieve higher margins in the first quarter of 2017 through firmer pricing for their products and services,” said Stuart Mackintosh, NABE president. “At the same time, materials cost pressures also appear to be increasing. Panelists raised their expectations for economic growth by a fairly substantial margin, with just over two thirds now expecting GDP growth above two percent in 2017.”

The share of respondents reporting rising employment at their companies over the past three months fell to 27 percent from 32 percent in the previous survey, while the share reporting a decrease in employment fell to 11 percent from 15 percent in the same survey three months ago. Those reporting no change in employment in the past three months rose to 61 percent from 52 percent.

Survey respondents who anticipate their companies will add workers in the next quarter fell to 30 percent in January from 33 percent in the October survey, while those expecting job reductions edged down to 14 percent from 16 percent. This results in a net rising index of 17, unchanged from October’s index consistent with readings over the last 12 months.

The survey asked participants if their companies delayed or altered any hiring or investments in anticipation of potential changes in U.S. economic policy following the newly elected President Trump. The majority of organizations across all sectors have made no changes to hiring or investment decisions since the November 2016 election. Fifteen percent overall and 23 percent of those from companies with 100 or fewer employees, report delays in hiring or investment decisions as a result of the election. An additional four percent, regardless of company size, and eight percent of those from smaller companies reported that they redirected hiring or investment decisions until after the election.

An Executive Recruiter’s Outlook

Karl Aavik, founder and president of Intrepid Consulting Group in Oak Brook, IL, said his firm has seen somewhat different results from the NABE survey. For Intrepid, which recruits senior leaders for the technology, manufacturing, and consumer goods sectors, January billings were up more than 20 percent, he said.

“The last three client meetings we were called into, one was to do a replacement of an executive that got promoted into a higher position,” Mr. Aavik said. “The second one was to replace an executive that had been recruited away by another company. And the third was to do a management assessment of an executive team because the board is looking toward a substantial growth program and they wanted to get an idea whether they have the right team in place to double the size of the company in the next few years.”

“So all three of those, in my mind, point toward pretty healthy growth-oriented hiring as opposed to, ‘We’re restructuring because we’re cutting costs.’ From our perspective, things look pretty darned positive.”

Last year’s election created a lot of uncertainty for businesses, Mr. Aavik conceded. Now that it’s been settled, no matter how one felt about the results, companies are feeling more free to move forward with hiring and other plans. Mr. Aavik said his expectations are much in line with economists who predict GDP growth better than two percent this year.

A Contagious Positive Outlook

“My perception is that there was a lot of wait and see last year and I think a good part of it was due to the political season we were in,” he said. “The perception I have regardless of whatever side of the political spectrum you’re on, people are more enthused about the economy right now than they were three months ago.” Business leaders, generally, are making plans around growth rather than making plans around restructuring, he noted. “Everyone’s focus right now is on growth.”

To a certain degree, that positive outlook has been contagious. “People start to get a little more optimistic, so they start talking about ‘How are we going to invest?’ and ‘How are we going to grow?’ and that has a ripple effect. There’s a virtuous circle going on right now where the more people talk about it, the more people act on it.”

Looking ahead, Mr. Aavik said he expects more of the same thinking. “The biggest changes will be in tax policy and the potential for companies to repatriate overseas earnings, both of which will be significant shots in the arm for the U.S. economy,” he said. “It’s going to be a great year. A great year for industry and a great year for the search industry in particular.”

Contributed by Scott A. Scanlon, Editor-in-Chief, Hunt Scanlon Media