Hiring During a Recession

by Jennifer Ridgeway and Cameron Macht
June 2010

Long, Deep, Broad Recession

During a recession, much of the attention is rightfully paid to the plant closings, mass layoffs, jobs lost ,and unemployment insurance claims filed. The bad news can be overwhelming. There is almost unanimous agreement that the recession that began in December 2007 was the longest, deepest and broadest since the Great Depression. But even in the midst of this prolonged downturn hiring activity is still occurring.

“Longest” simply refers to the length of the official recession. The 1990-1991 and 2001 recessions each lasted eight months from peak to trough. The average for recessions since 1945 is 10 months. Although the National Bureau of Economic Research’s Business Cycle Dating Committee had not officially marked the end of this recession when this article was published, it will likely have an official peak to trough period of at least 17 months.

By “deepest” we mean the total number of jobs lost. The southwest region of the state lost 7,570 payroll jobs between third quarter 2007 and third quarter 2009, and the unemployment rate passed 8 percent in the spring of 2009, compared to just over 5 percent two years earlier. That job loss accounted for a full 4.2 percent of jobs in the region, compared to a 0.7 percent loss in the years following the 2001 recession and a net gain in employment during the 1990-1991 recession. Although final employment data are not available (and the end of the recession is officially yet undetermined), thus far the loss from this recession has matched losses from 1980 to 1982 where two years of losses during twin recessions totaled 4.4 percent (see Figure 1).

“Broadest” refers to the breadth of industries affected by the latest recession. Between third quarter 2007 and third quarter 2009, only two sectors in the southwest planning region gained jobs -  educational and health services and public administration. All other industries experienced job loss of at least 2 percent, although manufacturing and construction’s double-digit losses accounted for almost three in four jobs lost (see Table 1). Such a gloomy assessment of the past few years might lead someone to ask, “Has anyone been hiring?”

Counting jobs versus hiring activity

Even within the job counts mentioned, differences exist within industries when you look at the details. Manufacturing as a broad sector shed 4,200 jobs (12 percent) between 2007 and 2009, based on the average of the first three quarters in each year, but not every manufacturing industry experienced equal losses. Likewise, the educational and health services sector added more than 900 jobs over the period, but those numbers mask a lot of differences at the detailed industry level.

In manufacturing, for example, the animal slaughtering and processing, agriculture, construction and mining machinery manufacturing, basic chemical manufacturing, beverage manufacturing, dairy product manufacturing, and medical equipment and supplies manufacturing sectors all gained jobs between third quarter 2007 and third quarter 2009, although many of those industries were still at levels below peak employment in 2005 and 2006. In health care both ambulatory health care services and nursing and residential care facilities saw measurable job gains while hospitals suffered employment cuts.

These job numbers are the best way for communities to gauge their job base and the changes in the net number of jobs. In terms of business needs, they show which industries are adding the most net new jobs which in turn may help focus job-training efforts. However, even a detailed industry look at the net number of jobs fails to describe hiring activity fully. Some industries do considerable hiring, even though their total employment levels are falling, because they have high levels of turnover or seasonal employment.

Two sources of hiring statistics help uncover these differences:

1. Minnesota Job Vacancy Survey
2. Local Employment Dynamics and
   Quarterly Workforce Indicators

The Minnesota Department of Employment and Economic Development (DEED) Job Vacancy Survey is administered twice a year in the second and fourth quarters, and it asks employers about their open-for-hire positions. The results detail the industries and occupations that have the largest number of job openings. We can analyze several years of data to identify changes.

Averaging second and fourth quarter rounds for 2007 and 2009, health care and social assistance had the highest numbers of openings in both years (see Figure 2). However, every industry listed in Figure 2 had fewer job openings in 2009 than 2007, and overall openings in the region were down 50 percent. While manufacturing had the second largest number of openings in 2007, the industry’s 76 percent hiring reduction over the last two years pushed its number of vacancies to a quarterly average of less than 200 across the 23-county region in 2009.

Quarterly Workforce Indicators

The second source of information on hiring activity is the U.S. Census Bureau’s Local Employment Dynamics (LED) program and Quarterly Workforce Indicators (QWI). The programs use administrative records, demographic surveys and censuses, and economic surveys and censuses to integrate information about individuals (e.g., place of residence) with information about the employer (e.g., place of work and industry).

The LED and QWI are able to provide measures of labor market dynamics — such as turnover, job creations, separations, and new hires — that give a much more complete description of the constant and significant changes in labor markets. While measures of net change, such as job growth, are essential indicators of economic performance, they fail to reflect the magnitude of the ongoing labor market activity accurately. For example, according to the QWI data, there was a net loss of 558 jobs in Workforce Service Area (WSA) 7 (see Map 1) between first and second quarter 2009, measured as the difference between current and previous employment at each business. However, the data also reveal more than 11,000 new hires at regional businesses but an even larger number of separations.

Table 2 demonstrates which industries in WSA 6 and 7 were doing the most hiring during what might be considered the most serious time frame of the latest recession, late 2008 though the middle of  2009. The data clearly show that for most industries, hiring activity is down significantly. However, certain sectors have continued to bring in new workers even if they aren’t always adding net new jobs.

In both WSAs, nursing and residential care facilities, and food services and drinking places (both high-turnover industries), top the list in hiring activity. However, in WSA 6 hiring activity was down from the prior year; and, in the case of food services and drinking places, so was employment in the industry. In other health care industries in WSA 6, ambulatory health care services saw a small reduction in hiring and overall employment growth, while hospital hiring and employment were both down considerably over the year.

General merchandise stores, which saw one of the largest net increases in jobs in the region from the second quarter of 2008 to the second quarter of 2009, also saw the largest increase in hiring activity in the region. Other retail trade subsectors such as gasoline stations, nonstore retailers, and motor vehicle and parts dealers all saw significant declines in hiring activity in the past year.

In WSA 7 the nursing and residential care facilities industry and hospitals increased overall employment, even though hiring was down in hospitals. Ambulatory health care services, on the other hand, had reductions in both hiring and overall employment, but hiring was still great enough that they ranked 15th in the region in terms of total new hires.

In both WSA 6 and WSA 7 the hiring rankings include manufacturing industries despite the fact that manufacturing employment has generally fallen during the recession. Food manufacturing gained jobs over the last year in both WSAs, although hiring growth slowed considerably in WSA 6. Also in WSA 6 machinery manufacturing mostly held steady in employment. Chemical manufacturing suffered rapid drops in hiring and jobs as the ethanol and biodiesel industries endured price hikes in fuel costs. In WSA 7 printing and fabricated metal product manufacturing managed to make the list, despite reductions in both hiring and employment. Both areas continued to hire people in animal production, although hiring growth in both WSAs was down double-digits.

The QWI data allow analysis of turnover rates as well, giving us a better picture of how high levels of hiring might be related to high turnover. In the case of food services, administrative and support services (which includes temporary employment agencies), and nursing and residential care facilities, turnover may be a key factor, for example.

Implications of information about hiring activity

While information about the number of jobs tells us a lot about the employment situation in different industries, hiring numbers tell job seekers where the open positions are. The numbers might also start to point out areas where industries are hiring smaller numbers of key positions even though a large number of losses for other jobs drags down the net total.

So even when the headlines are dominated by the news of higher unemployment rates and mass layoffs, the classifieds are still highlighted by job postings and new career opportunities. On MinnesotaWorks.net, the state’s online job bank, more than 350 jobs were listed in WSA 7 and around 225 job postings in WSA 6 on any given day through the first quarter of 2010.

In an attempt to help job seekers better understand where hiring is occurring in their region of the state, DEED created the Occupations in Demand (OiD) tool. (www.PositivelyMinnesota.com/oid/) OiD combines data from the Job Vacancy Survey, Occupational Employment Statistics, and Unemployment Insurance claims statistics programs, measuring short-term demand for jobs locally. The typical wage, long-term employment outlook, training (or degree) required, and schools that offer training programs for each occupation are also listed on the online OiD tool.

Job seekers can use the demand lists in their job search and career planning activities, depending on whether they want to get back in the workforce immediately or want to enter a training program. Employment counselors can use the OiD data to allocate training resources more efficiently, therefore producing more skilled workers for local employers and ultimately benefiting the regional economy.

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