Hiring Will Rise in 2011, But Will It Be Enough?

A relatively terrible U.S. unemployment report for November has cast doubt on the optimism suggested by other economic indicators. Yet a new survey (.pdf) of employers by employment services firm Manpower Inc. says that hiring will be stronger in the first quarter of 2011. One would certainly hope so, as it was too weak throughout 2010 to materially bring down the unemployment rate. Will that change in the coming year?

First, let's look at the data that manpower provides. It asked employers whether they intend to increase, decrease, or leave unchanged their workforce. Here are the results:

manpower results 2011-q1.png

If you look strictly at the "increase" column, then you'll likely be underwhelmed. In fact, hiring appears to be declining from the third quarter of this year through the first quarter of 2011. But that isn't exactly right, as these quantities aren't seasonally adjusted. That's why the last column is the most important. Check out the number highlighted in yellow. If you compare it to the same net change in Q1-2010, then you see a clear improvement: hiring might be nearly twice as strong in early 2011.

Here's a chart showing some additional history of the results from Manpower's survey:

manpower chart 2011-q1.jpg

The report also provides some sector-specific estimates. The only major industry that anticipates net firing in the first quarter is construction. This makes sense, considering that little building will be needed as the housing market remains slow and most firms won't expand much in a sluggish economy. Meanwhile, the strongest sectors for employment growth will be mostly in the service industry. Leisure and hospitality, professional and business services, and information will lead the way, along with wholesale and retail trade.

So how much hiring does Manpower's survey actually translate to? If you have 9% net hiring in the first quarter, compared to 5% in the same quarter for 2010, then close to a half million workers could be added to the U.S. economy. That's not a staggering number in light of 15.1 million unemployed, but it would be enough to begin very slowly pushing down the unemployment rate.

Unfortunately, this survey is a little too vague to draw that strong of a quantitative conclusion, because it doesn't ask firms how many workers they'll hire -- just whether or not they'll hire anyone. That makes the real takeaway of the report its confirmation of what we already thought. Despite the weak November unemployment numbers, the U.S. labor market will begin to grow more consistently. But its improvement will be far slower than we'd like to see. Even by the end of next year, unemployment will almost certainly be above 8%.