July 19, 2011

WHY EMPLOYERS ARE SLOW TO FILL JOBS: BUSINESS CLASS

Steven J. Davis - Bloomberg.com
Bill Clinton put his finger on a distressing aspect of the U.S. jobs situation in a recent television interview. The former president remarked that openings are being filled at only half the rate of previous recessions, even though current unemployment is much higher. He stressed the bleak outlook for job-seeking construction workers and the need for retraining and skills development.

He has a point: Construction workers can't easily become nurses. And, given the weak housing market, an early return of boom times in construction is highly unlikely. So skill mismatch will persist. It slows the pace of job filling by making it harder for employers to find suitable hires.

Yet skill mismatch is by no means the whole story. Recent research points to a shift in recruiting behavior by employers as another important factor.

Employers influence the pace of job filling by the intensity of their recruiting efforts. Under an aggressive approach, an employer places help-wanted advertisements, reaches out to attractive candidates and retains professional recruiters. Under a relaxed approach, an employer tends to rely on word of mouth or waits passively for applicants. Employers can also screen candidates quickly or slowly. They can set a high or low bar for experience, qualifications and promise. They can offer more or less attractive compensation packages.

To quantify recruiting intensity, Jason Faberman, John Haltiwanger and I dug into the innovative Job Openings and Labor Turnover Survey, published by the U.S. Bureau of Labor Statistics. We analysed the data and constructed a new index of recruiting intensity per job vacancy. As seen in the chart above, recruiting intensity per vacancy plummeted during the recession. Despite a modest rebound, recruiting intensity in 2011 remains 20 percent below 2006. Lower recruiting intensity leads directly to a slower pace of job filling.

Why did recruiting intensity plummet? More to the point, why hasn't it returned to pre-recession levels? Labor-market slack is part of the answer. Many employers see little downside to passing on marginally qualified applicants when new candidates arrive daily. There is no rush to hire. Anecdotal evidence suggests that some employers see the current situation as an opportunity to upgrade labor quality, hiring only the most outstanding candidates.

Another part of the explanation involves broader economic conditions. The same concerns about weak sales and an uncertain economic outlook that depress job creation also undercut the desire to fill openings. We live in a time of extraordinary uncertainty about government policy with respect to taxes, health care, financial regulation, monetary issues, environmental regulation, and other areas. The political impasse over the federal debt ceiling further muddles the outlook. Policy uncertainty discourages investment, job creation and hiring.

Other evidence points to a significant shift in job-seeking behaviour by the unemployed.
Government data show that hours of job search per unemployed person fell 15 percent in 2009 from 2008, rebounding only slightly in 2010. Using different data, Alan Krueger and Andreas Mueller conclude that the longer a person is unemployed, the fewer hours per week they devote to the search for a job. This pattern is noteworthy because long-term unemployment is at historic highs. Less search activity by jobless workers is likely to further slow the pace of job filling.

What lies behind the decline in job search time per unemployed after 2008? Perhaps a lack of success in job-hunting leads to downward self-assessments of skills, capabilities, and market opportunities. Reassessments of this sort imply a drop in the expected financial payoff from search activity. Or perhaps job-hunting becomes increasingly painful, for psychological reasons, as a period of unemployment lengthens. Either way, the response is less time devoted to finding a job. Under a more benign interpretation, individuals become more efficient searchers with practice, that is to say, they become faster at scanning help-wanted ads and judging those that offer good prospects.

Policy plays a role here, too. The extension of unemployment benefits eligibility to 99 weeks under the American Recovery and Reinvestment Act of 2009 lessened the financial incentives for job losers to search for work and to accept positions with low pay. It also increased the number of unemployed in name only -- those who go through the motions of job seeking to collect unemployment benefits, but who would have left the labor force absent the extension. The severity of these negative side effects and their impact on job search activity are unclear.

Summing up, employers have been slow to fill jobs for several reasons. Skill mismatch is a major concern, and one that defies easy solution. Low recruiting intensity is another significant factor. A return to robust growth would cause employers to intensify recruiting efforts, especially under a more stable policy outlook. Job openings would fill more quickly, contributing to a pick-up in the pace of hiring. Sustained growth would also improve opportunities for workers, re-energize job-seeking efforts and diminish the unemployment rolls.

Steven J. Davis is a visiting scholar at AEI.

I-9: EMPLOYMENT INTERRUPTIONS (PART 1)

The Employers Council
A common issue in administering I-9s is whether a new form must be completed when an employee returns to work after a break in service.. Page 20 of the Handbook for Employers, Instructions for Completing Form I-9 www.uscis.gov/files/form/m-274.pdf has the following
guidance:

"Leaves of Absence, Layoffs, Corporate Mergers and Other Interruptions of Employment
You must complete a new Form I-9 when a hire takes place, unless you are rehiring an employee within three years of the initial hire date. However, in certain situations, a hire is not considered to have taken place despite an interruption in employment. In case of an interruption in employment, you should determine whether the employee is continuing in his or her employment and has a reasonable expectation of employment at all times. These situations constitute continuing employment:

• Approved paid or unpaid leave on account of study, illness or disability of a family member,
illness or pregnancy, maternity or paternity leave, vacation, union business, or other temporary
leave approved by the employer.
• Promotions, demotions or pay raises.
• Temporary layoff for lack of work.
• Strikes or labor disputes.
• Reinstatement after disciplinary suspension for wrongful termination found unjustified by any
court, arbitrator or administrative body, or otherwise resolved through reinstatement or settlement.
• Transfer from one distinct unit of an employer to another distinct unit of the same employer;
the employer may transfer the employee’s Form I-9 to the receiving unit.
• Seasonal employment.
• Continuing employment with a related, successor, or reorganized employer, provided that the
employer obtains and maintains, from the previous employer, records and Forms I-9
where applicable."

DRUG/ALCOHOL AWARENESS TRAINING

The Employers Council
In response to member requests, we now offer two convenient webinar solutions for drug awareness training.

Drug & Alcohol Awareness Training for Managers & Supervisors, Tuesday, July 26, 2011, 12:00 - 2:30 PM will cover how to recognize and respond when encountering workplace substance abuse in a way that minimizes litigation risks. As an added bonus, this
course fulfills initial DOT training requirements. And, if your managers and supervisors already had drug/alcohol awareness training, we offer an easy refresher option.

Drug & Alcohol Awareness Refresher Training for Managers & Supervisors, Tuesday, July 26th, 7:30 - 8:30 AM, will reinforce and review substance abuse recognition and response techniques. Register now for either webinar via the Members Only portal (www.ecutah.org/member) on our website. For help call Lisa at the Council office.

WHAT WOULD A FEDERAL DEBT DEFAULT MEAN TO MANUFACTURERS?

Quick Manufacturing News
Default could sabotage manufacturing's tenuous recovery -- depending on how long it lasts. Click to continue


BUSINESS ANALYTICS STILL IN INFANCY STAGE IN MANUFACTURING

Quick Manufacturing News
Manufacturing, in particular, seems to be tailor-made to take advantage of business analytics, as more and more of its operations rely on the comprehension of data, such as enterprise and production software, sensor findings and electronic transactions. Click to continue

IMPORT ACTIVITY DROPS 6% THROUGHOUT U.S. PORTS

Quick Manufacturing News
Total traffic for all imports entering all U.S. ports was down 6% in week 25, 2011, compared to the same week in 2010, according to U.S. import market data compiled by Zepol Corp. For the year to date, overall traffic is up 6% over the same period in 2010. Click to continue

NEW GUIDELINES TO DETERMINE HEARING LOSS RECORDABILITY

Quick Manufacturing News
The National Hearing Conservation Association points out that occupational hearing loss cases may be underreported, despite OSHA's requirement for companies to report documented hearing loss. Click to continue