Help Wanted Index Pointing To Employment Slowdown?
The Conference Board publishes a monthly "help wanted" index which tracks the number of Total Online Help Wanted Ads and the Number of New Ads. The data for this series currently goes back to 2005 after revisions to the index were made. (The original data series which tracked "help wanted ads" in newspapers was discontinued after the revisions but that data series goes back to 1951.) In the January release of the help wanted index the number of online help wanted ads increased to 5,044,673 from 4,937,764 in December. The number of new ads, however, dropped to 2,915,271 from 3,115,192.
In order to use the older discontinued data, for a longer term historical perspective, I converted the new data to a composite index using the percentage change in the number of new help wanted ads. I then set May 2005, the starting month of new index, to 38. When combined with the older historical data it produced the following chart.
While it is clear that the index declines as the economny heads into recessions - it doesn't really give us many clues about the present situation regarding employment, jobless claims or the economy. What we can tell from this chart is that since the end of the last recession the hunt for employees has remained relatively weak as compared to previous post-recession recoveries. Of course, this goes hand-in-hand with an economy that is still running at sub-par growth rates during the same period of time and being primarily supported by continued interventions from the Federal Reserve.
If we take the same chart and compare it to total non-farm employees a clearer picture emerges. As shown in the chart below the ebb and flow of the help wanted index correlates highly with the level of total non-farm payrolls. The recent stagnation in payrolls is consistent with the stagnation of the demand by employers issuing "help wanted" ads. Historically, such stagnation has been indicative of peaks in the employment cycle. This is a very real "fly in the ointment" of those expecting a resurgence of economic activity in the months ahead.
Not surprisingly there is also a high correlation between the help wanted index and jobless claims. As shown below the bottom in help wanted ads generally corresponds very closely with peaks in jobless claims.
The help wanted index was rising in November and December which corresponded with the sharp drop in claims as temporary seasonal hires needed for the holiday shopping season pulled people out of unemployment lines. However, the drop in January, as seasonal hires are terminated, is supportive of the surge in claims in the most recent January claims report.
Naturally, since it is ultimately the strength of the overall economy that encourages hiring, thereby reducing jobless claims, there is also a high correlation between the help wanted index and GDP.
With the most recent print in GDP showed no growth, and the trend of growth in GDP over the last year decidedly negative, the stagnation of the help wanted index may be sending a cautionary signal. There are many hopes that the rest of this year will reverse the sub-par economic growth rate witnessed over the last four years, however, there is little evidence currently that will be case. The current macro-economic environment is still being supported by artificially suppressed interest rates and massive amounts of liquidity. These artificial supports erode economic strength over time as incomes and confidence are negatively impacted.
It will likely be very beneficial to pay attention to the help wanted index for clues as to the direction and strength of employment, claims and the economy in the months to come. Currently it is looks a lot like we may be building a peak for this recovery cycle.