Employment Opportunities for the Class of '07

Be Prepared for a Little More Competition

By Philip Gardner, Ph.D.

College seniors over the past several years have been greeted by healthy labor markets. It took several years after the college labor market crashed in January 2001 to regain its health. However, the last two years were witness to expanding opportunities between 12 percent and 16 percent. Many have anticipated a strong market for the class graduating in 2006 and2007. The college career fairs are packed with employers, employers are requesting more on-campus interview schedules, and Internet job services boast of record numbers of listings. With expectations running high, many observers were surprised when the results from Michigan State University's annual recruiting survey indicated that overall employment opportunities would expand by only 5 percent this year.

What's the story?

This article reviews the findings from Recruiting Trends 2006-2007 recently released by MSU. Readers will encounter an interesting situation, something statisticians call a bimodal distribution, in which we have two groups of employers behaving very differently in the market. One group (42 percent of the sample) is increasing hiring at a significant pace while another equal-sized group is decreasing hiring at a significant pace. Fortunately, those employers who will be hiring will do so at a greater rate than employers are decreasing their hiring from last year.

Labor Market Outlook

Optimism about the strength of the college labor market reached the highest level since 1999 and 2000, based on ratings provided by employers. The following graph shows that the 2006-07 average of 3.29 (good to very good) compared favorably to the robust labor markets of the late 1990's. This optimism was shared by numerous economic sectors, including retail, health services, construction, and finance and insurance. The manufacturing, information and arts respondents were not quite as positive.

Various factors were shaping the labor market this year, including the fall elections, as well as the upcoming 2008 presidential election, the cost of doing business, and economic shifts in the economy. Uncertainty slows and may even stop employers from hiring, and the fall elections interjected plenty of uncertainty. Employers were concerned about political action in areas such as immigration, taxes, and trade that may impact their ability to remain competitive. Costs related to doing business have risen, especially health care, cost of living adjustments, and costs for supplies and materials. Fortunately, inflation has remained manageable and energy prices have abated, allowing employers to consider hiring. The biggest concerns center on the slowdown in housing and retail. The housing sector, including mortgage refinancing and construction, has driven much of the economic growth during the past five years. The contraction in this sector is expected to ripple to other sectors that supply inputs (windows, insulation, and equipment) to housing. Retail, a driving force in the expansion of opportunities over the past three years, is pulling back. Consumer spending has been cautious in recent months, a trend that has retailers anticipating less growth in the next year.

Two factors caught our attention. First, employers reported the availability of experienced labor in the market that was more appealing than inexperienced college graduates. The second factor is the attitude of new college graduates.

Regarding the labor supply, there are three contributing sources: (1) dislocated labor from manufacturing and other businesses that have been downsizing or outsourcing production; (2) recent graduates who entered the workforce when the availability of opportunities was limited and who are looking for new positions; (3) and new retirees who really do not want to leave the workforce.

Employers find these individuals attractive because they are easier to train, can quickly contribute to the company's bottom line, and are more committed to working.

This connects to the second factor – the attitude of new college graduates. As one respondent said, "Culturally, this generation feels a sense of entitlement, and we are seeing a trend in lack of dependability and effort to strive for excellence in every task, not just those that are important."

Hiring Intentions

More than 50 percent of respondents indicated that they had definite plans to hire college graduates this year. Another 20 percent had made preliminary plans to hire college graduates this year. About 23 percent were still uncertain about their hiring at this time due to uncertainty in the economy.

The real question is whether the hiring indicated by employers will increase, remain at the same level, or decrease from last year. By comparing this year's hiring levels with the actual levels from last year, we can identify the number of firms and organizations that will increase or decrease hiring. It is this calculation that produced a bimodal grouping of employers. The number of employers increasing their hires is offset by an equal number who are decreasing hiring, with only a few firms remaining at the same level as last year. Approximately 42 percent will cut the number of positions they will attempt to fill compared to last year. The level of cuts will range from 1 to 450. Forty-two percent will add more positions compared to last year. The number of positions to be added range from 1 to 2,525.

Actual Hiring for 2006-2007

Employers in this survey expect to hire nearly 44,000 college graduates this year. Hiring is expected to increase by approximately 5 percent, which means that those increasing hiring will add more than those cutting opportunities. The following table shows that the growth is modest for associate degrees and bachelor's (about 3 percent) and  more robust for MBAs (8 percent). The fluctuation in master's reflects variation in small groups of employers who hire at this level. Accounting hiring, which is almost all done at the master's level, now is very positive. The fluctuation in technical and scientific hiring among small firms caused this perceived drop of about 10 percent.

Within the group that is hiring more students are firms facing the pending retirements of a significant portion of their workforce. They are involved in "succession planning" that will require recruiting and training a large pool of new employees to fill these positions. Many of these companies are hiring new graduates for management training positions that will prepare them to take mid-level management positions in about four to five years. Small, entrepreneurial firms are also hiring, especially in engineering design, computer systems and programming, consulting, and environmental services. While many manufacturing firms are cutting positions, defense and aerospace, electronics, medical devices, and food and beverage production are all hiring. Other hot sectors include oil and gas, utilities, wholesale firms, transportation services, especially railroads, trucking, and delivery, financial services (though it will be very competitive), and accommodation and food services.

Job growth is cooling in the construction sector and housing-related industries, including manufacturing, mortgage lending, real estate, and professional services (engineering design, architectural services). The housing sector is expected to remain cool and possibly contract further over the six to ten months, which may further dampen employment growth in these areas. Retail also is cooling. The surge in retail hiring witnessed the past several years reflected the rapid expansion of the big retail stores and high household consumption during the same period. Consumers may be worn out, with savings at an all-time low and capital from refinancing no longer readily available. Retailers are also consolidating and slowing growth plans to match the change in consumers.

If the economy continues to slow or only grow at a modest rate during the opening months of 2007, employers who provide consulting services and business services (public relations, advertising, for example) may be pressured to restrict hiring.

Because of the retirement situation, large employers are aggressively seeking new employees. They may be in the hunt for the next several years as experienced employees begin to leave. It is the medium-sized firms that appear to be cutting back the most in hiring. This finding probably reflects the slower growth of the economy and lack of new business from larger firms. As we have seen over the past 10 years, small employers continue to contribute significantly to the stability of the college labor market. College graduates should continue to look to these smaller firms for exciting work opportunities.

What Are Employers Looking For

A pattern we saw emerge two years ago appears to continue – the need to fill a large number of sales and marketing positions, with 45 percent of employers seeking these talents. Engineers are sought for design and production positions. Accounting remains strong across all sectors of the economy. Top positions include:

The category "all majors" remains at the top of the list as the most requested. In other words, employers are seeking new employees from a diverse population of potential graduates. Beyond this we see more interest in business and engineering majors this year. This is partially explained by the need to fill management training positions in large firms which generally involve majors from these two disciplines. Graduates from other disciplines should not be prematurely disappointed as there seems to be plenty of opportunities.

Majors that will be in higher demand this year include:

• All Business Majors
• Accounting
• Marketing
• Finance
• Business Administration
• Electrical Engineering
• Mechanical Engineering
• Civil Engineering
• Computer Services
• Nursing

That does not mean other majors will go begging. The following majors will also experience active job markets:

• Communications
• Human Resources
• Psychology
• Environmental Sciences
• Chemistry

Starting Salaries

Most companies (55 percent) reported that they will not increase starting salaries over what they offered last year. The remaining 45 percent will only offer increases of about 2 percent. Depending on size of firm, location, and academic major, starting salaries are expected to range from the mid-20s to the mid-50s for most majors. Some graduates may receive offers outside this range depending on the position they are considering. Business majors can expect $25,000 to $60,000, with accounting and finance receiving the higher offers. Engineers will range from $30,000 to $75,000, with computer and electrical engineers receiving the higher salaries.

More employers are using commissions than in previous years. Approximately 15 percent of the employers indicated that they would be using some form of commission. For 75 percent of those offering commissions, the entire salary package will be tied to commissions. Graduates can expect other types of salary structures as they negotiate the terms of their positions. Some firms are offering performance bonuses, meaning the firm will provide a smaller starting salary with year-end performance pay based on what was accomplished during the year.

Where's My Promotion?

We wanted to know from employers what characteristics they key in on when evaluating recent hires for their next assignment or promotion. They identified a variety of skills, personal attributes and traits including these:

• Initiative: Clearly the most important criterion. Includes taking responsibility for work, willing to assist others, seeking out new assignments and seeking new opportunities for the company.
• Work ethic: Having a positive, enthusiastic attitude and willingness to proceed with determination and confidence.
• Personal attributes: Being friendly, mature, dependable, having the ability to handle stress and the character to act with integrity.
• Willingness to learn: Actively seeking knowledge and information, pursuing self-development and quickly advancing to next level of competence.
• Quality of work: Not only gets assignments done on time, but also demonstrates mastery of work, attends to details and has a sense of accomplishment, as well as high standards of performance.
• Communication: Possesses empathetic interpersonal skills, can clearly present thoughts (written and oral).
• Leadership: Can structure effective teams, set common goals and provide resources to achieve objectives.

Other factors such as passion, creative problem solving, understanding the big picture" through various perspectives, and knowledge of the industry and company, also appear to be important.

"I'm fired—but I did everything you asked!"

In the early 1990's, Johnson and Wales University did a quick study on what factors are likely to get a new hire fired. More than a decade later, we asked: "Are the lack of initiative, failure to follow instructions, missing deadlines, ineffective in teams, and poor communication skills still the behaviors that will get a new employee fired?"

Respondents were first presented a list of 10 common workplace concerns that can lead to reprimand, disciplinary action, and possible dismissal. They were asked to rate each concern as to how frequently (1= "not at all" to 5= "very often") these infractions lead to disciplinary action. The following chart lists the actions from most frequently observed (highest mean) to least frequently observed.

In order to derive the top five behaviors that will result in termination, respondents were asked to pick the one behavior that would result in dismissing a new employee. After compiling the responses, the top reasons new employees may be terminated are:

• Unethical behavior
• Lack of motivation/work ethic
• Inappropriate use of technology
• Failure to follow instructions
• Late for work
• Missing assignment deadlines
• Ineffective in working within a team

Several thoughts surface quickly in reaction to this list. First, the penetrating impact of the Enron debacle and similar scandals have resulted in the rapid dismissal of employees engaged in unethical practices. More than 30 percent of the respondents listed ethics as their top choice, clearly out-distancing the remaining factors on the list. The influence that technology has on our lives is pervasive, especially in its applications. In early 1990s, no one imagined Facebook, blogging, and an unlimited
universe to search for all kinds of (sometimes, dubious) material. Finally, the growing concern over the attitude that some members of this new, young generation is bringing into the workplace: less focused, less attached, and more self-absorbed.

Seize Your Opportunity

This year is expected to be another good year for college graduates as they search for employment. It may be a little more competitive thanks to more experienced labor willing to test the labor market. However, college seniors who have a job search strategy in place – well before graduation – should be successful in obtaining a position that will kick off their careers. Remember to use your campus resources to the max before you leave campus. Begin to network with family, relatives and friends, letting them know that you will be graduating soon and are eager to contribute to a company or organization. Networking is a great way to find that first position.

Michigan State University's Recruiting
Trends 2006-2007 is available from
Instructional Media Center,
20 Communication Arts Bldg.,
East Lansing, MI 48823
517-432-2650

Philip Gardner, PH.D., is director of the Collegiate Employment Research Institute at Michigan State University.