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Strong Labor Market Greets '06 Grads

Employment Outlook Summary from Michigan State University's Annual Recruiting Trends report

By Dr. Philip Gardner

The college labor market for 2006 graduates continues the expansion that began in time for last year's graduates. The nearly 900 companies that responded to Michigan State University's annual college labor market survey indicated they planned to hire between 6 and 14 percent more graduates than last year. And the news could be even better if economic conditions sway in favor of the employers!

Overall market conditions

For lack of a better image, the labor market resembles an undercooked pancake, firm on the outside but runny in the middle. Why such a gooey mess? Simply because about 40 percent of these employers will definitely hire college graduates this year and are very active on campus and at recruiting events. About 55 percent of the employers have made some preliminary plans to hire or are taking a "wait and see" approach until they have a better sense of what the economy will do.

At the time of the survey (September 2005) companies faced rising costs of business because of inflationary pressures on materials, higher interest rates, exorbitant energy prices, healthcare and cost of living (COLA) increases. Since the survey, energy prices have abated (but are still expected to increase by spring) and the uncertainty surrounding the impact of the hurricanes, especially Katrina, has eased. The rebuilding of the Gulf Coast has been a concern because of the demand pressures on basic construction inputs, access to capital, and skewed labor demands. So far these impacts have been minor, allowing employers to move ahead with their hiring plans.

All employers face the continued pressure to remain cost effective in the global economy. As a result, consolidation continues. So does adjustment to global integration by downsizing and shifting employment to cheaper labor markets. The number of jobs slipping away to overseas producers seems to have lessened, but the actual case may be that employers are simply not creating jobs in the U.S. in the numbers they once did, especially for employment requiring college degrees.

Many employers are attempting to plan ahead for the eventual retirement of the "baby boomer" age cohort. This demographic shift has been long talked about with some dread. The rapid exodus from the market, once expected, may appear as steady ooze. Boomers are finding it more difficult to leave the workplace than they thought. They simply do not have enough in their retirement accounts, and they are very fearful of the increasing costs of health care and the loss of retirement healthcare benefits  long promised by their employers. Yet, boomers are slowly retiring, making way  for younger employees, and employers are strategically seeking the best new graduates to fill their places.

Market outlook

The strength of the labor market was captured in the overall ratings on conditions in the college labor market. Having languished in the "poor" range from 2001 to 2003, the conditions improved to "fair" last year and this year topped the "good" mark. The following economic sectors were very positive about this year's job growth: construction, health services, education (opportunities outside K-12 education), government, and transportation (railroads, truck hauling and delivery services). However, transportation respondents qualified their remarks, stating that everything depended on energy costs.

Regional improvement was noted across the country. The Northeast (anchored by Boston), the Southwest (California and Las Vegas), and the Northwest (Seattle) expressed especially strong labor markets. The Southeast continued to display strong job activity. The South Central region, recovering from double hurricanes, was particularly upbeat about possibilities, except in the immediate New Orleans area. Only the Midwest states had some concerns, especially in the manufacturing sector, that dampened their outlook. However, diverse job growth involving many different types of businesses in the Chicago and Minneapolis metropolitan areas appeared to be adding a significant boost to the region's economy, despite the troubles in the automobile industry.

Hiring intentions

Approximately 45 percent of the employers indicated that they planned to increase hiring over last year. Another 23 percent were holding employment to the same level as last year. Unfortunately, 32  percent reported that they expected to decrease hiring. Economic sectors showing the strongest gains in job growth were concentrated in finance (including insurance and real estate), professional and scientific services, and administrative services. Manufacturing industries projected weaker hiring (with a few exceptions), as did information services, which include telecommunications and television, and non-profit agencies.

Overall, employers expect to increase hiring 6 percent this year. The average number of hires per company rose from 46.5 to nearly 48.5 from 2005 to 2006. The following table shows how the market is doing at particular grade levels. The MBA market is doing well for some students, but because of an oversupply of new MBAs the overall market is sluggish. Accounting and science graduates are driving the master's degree market.

Those employers who indicated that they were definitely going to hire reported that they were expanding by 14 percent this year. Those employers who had some uncertainty were actually reducing their hiring, if they elected to actually hire. Even more spectacular are the companies that plan to increase their hiring. For the approximately 260 companies in this group, job expansion is expected to be about 35 percent. On the other hand, those decreasing hiring (about half the number of those hiring) will reduce opportunities by 36 percent.

This pattern is the gooey part of the pancake. The employers with firm, positive hiring intentions (the pancake's outside) are really active in seeking new graduates. The gooey center – those companies with uncertainty – is definitely less enthusiastic about hiring. If the right economic stimuli fall into place in the spring, more of the pancake can be cooked. This will only expand the job market, giving more graduates opportunities for better jobs.

A closer look at the numbers reveals that a small number of employers were cutting hiring substantially. Problems in the automotive industry, in particular, strongly influenced the reported figures. If we remove these companies from the calculations, the labor market shows strength and resiliency. Here are the adjusted figures by degree level.

Where are the jobs?

There are some bright spots where  jobs will be more plentiful than in other sectors.

• Construction continues to be strong. However, some markets are slowing down and employers are adjusting their workforces. Small to medium construction firms are eager to hire. The wild card is the impact of Katrina and how much labor will be siphoned off to the Gulf Coast, leaving a shortage of trained technicians in other regions.
• Manufacturing: While the automobile sector and basic metals are having troubles, food processing, chemicals (including pharmaceuticals), medical devices, and some electronics
  are doing well. Also, defense contractors in this sector continue to hire, especially in aerospace.
• Retail has been growing rapidly for the past several years and employers are again expanding opportunities.
• Transportation: Railroads, trucking, and delivery are all strong even in the face of higher energy costs. Creative logistic management and grouping of key functions has increased opportunities for many of these employers. The railroads are preparing for a large number of retirements.
• Finance, insurance and real estate: Many opportunities exist for graduates as financial institutions are gearing up to help boomers retire. Even with the slowdown in the housing market, real estate remains optimistic.
• Professional and scientific services: Accounting remains hot. Environmental and civil engineering consultants reported increased jobs. The rest of the sector is taking a cautious approach, particularly in the scientific and engineering areas. This is where the market can get a real kick in the spring if these companies begin to expand their hiring.
• Administrative services: From car rentals to business service centers, this area continues to grab up big chunks of labor.
• Accommodation services: Restaurant and lodging companies are aggressively hiring. Leisure services expect improvement, especially in the Southeast (Florida) and West Coast.
• Government: Growth is being spurred by pending retirements, and defense and homeland security requirements.

As you start to look for one of these positions, remember that the small employer is really pushing the labor market forward. While large companies hire more graduates at one time, they are not increasing their hiring levels over last year. Smaller employers (and there are a lot of them) are increasing by more than 20 percent.

What jobs are available?

Last year we witnessed an explosion in sales and marketing related positions. This year is no exception. Nearly 50 percent of these employers are seeking candidates to fill sales and marketing positions. Finance positions are also popular, especially in financial institutions and financial services.

Several types of positions are making a stronger showing this year. Opportunities within the knowledge economy continue to expand. Positions in research, information management, consulting, and ecommerce have emerged as important functions where new graduates can expect to see openings. E-commerce embraces a wide range of academic majors from marketing and advertising to computer-aided design. English majors will be sought to write for websites, and graduates with good research skills also will find opportunities with Internet-based companies.

The range of jobs is important because fewer engineering jobs will be available. In some regional markets, engineers will have multiple job offers because of the breadth of employers seeking engineers. In other regions, engineering graduates will have a slightly tougher time finding jobs. In this situation it is important to look to small employers for jobs as they will likely be more active in the market.

With sales positions being the most prevalent, employers are seeking candidates from a variety of majors, especially those that develop good interpersonal communication competencies. Many of the companies with knowledge-based positions are seeking liberal arts graduates who bring breadth as well as depth to their analysis of information, and a willingness to look at situations from differing perspectives.

What salary to expect?

Salaries are expected to increase slightly this year. Remember that the vast global labor market is keeping a lid on salary growth. Employers continue to seek ways to minimize costs; a primary way is to tighten salary and benefit packages. Also keep in mind that smaller companies cannot easily match the salary levels offered by large multinational companies. The ranges in the accompanying table are dominated by business and technical salaries. Use caution when comparing these figures to offers you may receive. Regional costs of living need to be taken into consideration when discussing salary.

Final thoughts

With this strong job market, graduating students cannot become complacent and expect a job to be waiting for them when they cross the stage and receive their diplomas. Employers are being very strategic in their hiring. They want good candidates who can add value immediately to their companies. You will have to demonstrate that you have not only gained expertise in your chosen academic field, but also skills in communication, teamwork, time management, adaptability and work ethic. Be prepared to articulate and offer evidence that you have these skills.

Also of Interest from the Career Center Annual Internships, Co-ops, Entry-level, and Summer Gigs Section

Employers are very active this year on college campuses, attending job fairs, interviewing, and working with faculty to identify just the right people. The smaller employers may not be as visible, so the best way to learn about their job opportunities is through personal contacts. Networking remains the best method to obtain a job.

Do not put off starting your job search. It will take time and effort. Use your campus career center, keeping in mind that after you graduate you will not have these resources readily available. If you are unable to begin your job search now, at least leave campus with a strategy for conducting your search once you return home.

Other Features of Interest

• Summer Jobs Easier to Find This Year
  By RACHEL EMMA SILVERMAN, Staff Reporter of The Wall Street Journal
  Summer job prospects for students at places ranging from amusement parks to hedge funds are looking brighter this year after a long dry spell

Dr. Philip Gardner is the director of research for the Collegiate Employment Research Institute at Michigan State University. His research focuses on the transition from college to workplace readiness of college students and career development. He is the author of the annual Recruiting Trends report published by Michigan State University. This article originally appeared in the Second Semester 2006 edition of THE BLACK COLLEGIAN Magazine, produced by IMDiversity Inc.  The magazine, now marking the 35th anniversary of publishing, is distributed for free through career offices to students at over 850 college campuses nationwide.