In a recent speech, Atlanta Fed President Dennis Lockhart remarked, "Overall, there was more improvement in labor markets in 2014 than in any other year of the recovery. Employment conditions are improving, and improving faster, and prospects of continued progress are encouraging moving into the new year."
Although President Lockhart was referring to national labor market conditions in his speech, his assessment holds true for the Southeast as well. In 2014, the Atlanta Fed's Regional Economic Information Network (REIN) staff polled business contacts across the Southeast both at the beginning of the year and the end to get a sense of their hiring plans for the year ahead. Polling our contacts twice allowed REIN to gauge whether business hiring plans had changed during the course of the year, and we shared the January results with you. Fast-forward to last November, when we approached our contacts to ask the same set of questions. We were pleasantly surprised to see that the results were more upbeat.
The survey was conducted from November 10–19 and resulted in a total of 303 responses from a wide variety of firm types and sizes. In this post, we want to share the results as well as some comparisons over time.
The survey's first question asked contacts whether they expect to increase employment, leave employment unchanged, or decrease employment in 2015. The results showed that 59 percent of respondents said they planned to increase employment levels over the next 12 months; up from 46 percent in January and the highest reading in the six times we've conducted this survey. Another 31 percent indicated they planned to leave employment levels unchanged; down from 44 percent in January and the lowest reading since we began asking these questions in 2011. The remaining 10 percent of participants planned to decrease payrolls; unchanged from the beginning of the year. As the chart below shows, a noticeable shift in sentiment took place from January, when we last asked this question. It appears that firms that said they would leave employment levels unchanged are now saying they would increase employment.
Focusing on the 59 percent of firms that indicated that they planned to increase employment, we asked them to give us the top three motivating factors driving their decision. The most frequently cited reasons were similar to past results. The majority of firms cited high expected growth of sales as the most important reason for increasing employment. For the second most important factor, two selections garnered similar levels of response: current staff was overworked, and the firm needed skills not currently possessed by existing staff. Finally, the third factor was improvement in the firm’s financial position (see the chart).
Conversely, we also wanted to learn the top three factors restraining hiring. Similar to January, firms' primary concern remained their need to keep operating costs low. Other frequently selected reasons were the firms' inability to find workers with the required skills and uncertainties related to regulations or government policies. What stood out this time was that a larger share of firms said that they were unable to find workers with required skills: 13.8 percent in January compared with 21.0 percent in November. Also, fewer contacts said that expected sales growth was low: 15.2 percent in January compared with 9.7 percent in November. Additionally, uncertainty about health care costs subsided; a smaller share of firms noted this factor as a reason for not hiring (see the chart).
In short, it's clear that employment levels in the Southeast should improve this year, which is exactly what we said this time last year. Were we correct for 2014? Now that we have data in hand, let's see. According to the latest employment data from the U.S. Bureau of Labor Statistics, the district averaged 38,800 net payrolls per month for 2014, up from 33,600 net payrolls a month in 2013. So our contacts did, in fact, increase payrolls like they said they would last year. Let's see what happens this year!
By Shalini Patel, a REIN director in the Atlanta Fed's research department