Is the worst over?

April 17, 2003
There are subtle signs hiring of engineers may finally be on an uptick.

If you graduated from one of the nation's top mechanical engineering schools last year, you had only a 60% chance of landing a job by the time commencement rolled around. That was the average employment rate for newly minted MEs from Stanford, UC Berkeley, Georgia Tech, and the University of Michigan, all regarded as being among the top mechanical-engineering programs in the U.S.

But things are looking up both for new grads and experienced engineers. Economic indicators and informal measures are starting to hint that the worst may be over for manufacturers and engineers in the job market.

The latest figures from the Institute for Supply Management showed that economic activity in manufacturing has grown for the fourth consecutive month. Though the rate of growth slowed compared to January, it remains in positive territory. Ditto for production and new orders.

Several of the manufacturing industries ISM tracks reported growth. Among them are electronic components and equipment, transportation equipment, and instrumentation.

Durable goods orders and production (other than automobiles) have improved as well. And recent revisions in the gross national product indicate that manufacturers have stopped liquidating inventory and have begun building it. Capital spending has picked up from its lowest levels, indicating that some investment in plant and equipment has resumed.

The most recent Precision Metalforming Association (PMA) Business Conditions Report also says that for the third consecutive month, fewer of its member companies are reporting a workforce on short time or layoff. Only 19% indicate they have a limited staff (down from 23% one month prior and from a peak of 49% just over a year ago).

The flip side, though, is that capacity utilization, how much domestic manufacturing capacity is actually in use, remains low at 75%. Economists say 78% utilization is the magic number where capital spending begins to pick up. And ISM's manufacturing Employment Index continues to decline. It remains below the level that the Bureau of Labor Statistics equates with rising employment over time.

Nevertheless, there is anecdotal evidence that at least among new graduates, hiring has bottomed and may even pick up.

Though campus recruiting at Georgia Tech is at about the same level as a year ago, "We are getting more phone calls lately from companies wanting to interview. The volume of interest is going up and we are hopeful it bodes well for the fall recruiting cycle," says the school's Director of Career Services Ralph Mobley. Some 135 companies came to recruit Georgia Tech students last spring and about 50 hired MEs. They include tier-one automotive suppliers, oil drillers, and makers of consumer goods.

Salaries also were up slightly last fall compared to eight months previous. December ME graduates who had jobs started at an average of $48,700 versus $48,500 last spring. But the average number of offers, says Mobley, was down (for those students who had offers). It was 1.18 in December, 1.44 last spring.

At Stanford, the number of companies visiting campus dropped by 25% last year, but the actual number of jobs offered remained about the same as the year before, says Beverly Principal, the school's Assistant Director of Employment Services. Companies recruiting MEs were in the areas of homeland security, defense, biotech, and even investment banking. However, "Last year well over 50% of our students said they found a job via networking. There is no one thing that will get you a job in this environment," says Principal.

At the University of California at Berkeley, on-campus recruiting was down 30% last year. And it is too early to tell how things will shape up this spring, says Cal Berkeley Career Center Counselor Linda Hernandez. Even so, over 400 companies conducted some 8,000 interviews at the University in 2002. "One thing about mechanical engineers is they are pretty flexible and the curriculum is adaptable to a variety of industries," says Hernandez. "And we have had a few students get offers already. There is still hiring activity and things are not at a total standstill."

Manufacturers that include Ford Motor Co., BMW, and several aerospace firms visited Cal Berkeley last year. They recruited from a field of 129 BS, 51 MS, and 48 PhD mechanical-engineering graduates there.

At the University of Michigan, graduates are getting starting salary offers that are comparable to those extended last year, according to U of M Director of Engineering Career Resource Center Cynthia Redwine. Campus visits by companies recruiting this past fall and winter were down from last year and overall, the market has been quite slow, she says. "Consulting is the industry that is probably down the most and automotive is not high on the list right now," Redwine says. Still, "So far this year, mechanical engineers are the ones reporting the most offers, though that isn't really saying much."

According to the U.S. Dept. of Labor, Bureau of Labor Statistics, a few segments of the manufacturing industry actually showed some growth during the recent recession. The effect can be seen in the diffusion index of employment, which measures the share of subindustries in which employment is rising at any point in time. Statistics show growth in only one industry, tobacco, in either 2001 or 2002. But hydraulic cement producers increased employment by almost 5% in 2002, while producers of asphalt paving and roofing materials increased 4%.
An index value of 50 indicates employment is rising in half the industries and declining in half. The diffusion index is effectively the share of three-digit SIC industries that are growing.

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