Blogs / 2012 / January

Despite media reports that provide varying degrees of confidence regarding the state of the economy, the US labor market displayed signs of improvement in 2011 and several indicators – namely, projected salary increases, unemployment and workforce planning surveys – suggest the positive trend will continue this year.

Salary Increases
WorldatWork (formerly the American Compensation Association) regularly surveys more than 2,500 US organizations to collect salary increase budget information. This year’s survey reports the actual average 2011 salary increase was approximately 2.8 percent, which is slightly less than the projections for the same year, but still well above the historical lows of 2.2 percent and 2.5 percent in 2009 and 2010, respectively. The projected 2012 average salary increase is 2.9 percent. In addition, there are fewer extremes in the data than in past recent years; the number of organizations planning to freeze salaries in 2012 has fallen to 8 percent and only 4 percent intend to set salary increase budgets greater than 4.0 percent. These characteristics show that organizational operations are stabilizing and highly aggressive and cautious salary increase practices are declining as a result.

Unemployment
HR research organizations have pointed out that the annual inflation rate was higher than the average salary increase budget in 2011 for the first time in more than 30 years. The proposed explanation for this occurrence is unemployment. With unemployment at an average of nearly 10 percent, employers are able to remain competitive while keeping salary increases, and pay levels in general, relatively low in comparison to pre-recession rates. Interestingly, unemployment has affected different employee groups quite differently. According to data reported by the US Bureau of Labor Statistics, unemployment is just over 4.0 percent for those with at least a bachelor’s degree, while employees with less education are experiencing unemployment levels of up to 14.0 percent. Notably, unemployment rates across all workers fell in 2011 when compared to 2010 averages.

Workforce Planning
Last week, Fortune Magazine published its 2011 “100 Best Companies to Work For.” (For the complete list of companies, click here.) Among the winners, 25 reportedly have openings for 700 or more jobs, totaling almost 137,000 available positions. While many of the jobs are professional in nature, which speaks to the relatively low unemployment among college-educated workers, some, including Whole Foods Market, American Express and Marriott International, are recruiting lower level employees.

Additionally, several recruiting firms’ recent surveys suggest these companies do not represent isolated examples of growth. Among the organizations responding, just over 20 percent expect increased recruitment efforts to meet growth goals. Nearly all others intend to maintain the status quo or engage in some hiring in 2012; only an average of 5 percent indicated that headcount may be reduced this year.

These signs of improvements in staffing levels, coupled with increased salary budgets and reduced unemployment, indicate that 2012 may be the year American workers, by and large, experience a return to normalcy. As the labor market tightens, organizations should take inventory of their critical jobs and top performers and ensure strategies are in place to attract and retain individuals that will drive future success.

Priya Kapila is a senior consultant at CBIZ Human Capital Services. Working in CBIZ’s St. Louis office, Kapila handles various elements of compensation plan design for diverse organizations, including structuring executive compensation packages, developing performance-based incentive programs, and designing comprehensive salary systems. For more information on Priya Kapila and CBIZ Human Capital Services, please call (314) 692-2249 or visit www.cbiz.com/hr/.