What it means
The original version was compiled from the volume of help-wanted advertisements in newspapers in a set of cities, and it was published for decades by a business research organisation called The Conference Board. As recruitment moved online, newer versions counted job postings on websites instead.
The name has been attached to different series over the years, so anyone using the figures should check how a particular version is built. Economists like the index because it is a forward-looking signal.
Companies usually advertise for staff before they hire, so a rise in job advertising can come before a fall in unemployment. It can also point to labour shortages, because many unfilled vacancies suggest that employers are struggling to find workers.
To use it well, analysts convert the raw counts into an index, where a base period is set to 100 and later periods are expressed relative to it. They also compare vacancies with the number of unemployed people to see how tight the market is.
When there are many vacancies per jobseeker, workers have bargaining power and wages tend to rise. For a business, the index is a planning tool.
A finance team can use it to forecast wage pressure, set recruitment budgets and judge whether to expect higher staff turnover. A rising index might suggest bringing forward hiring or raising pay offers before competitors do.
The index has weaknesses. Advertising practices change, one vacancy may be posted on several sites, and some jobs are filled without being advertised at all.
It also says nothing about the quality of the vacancies, so it works best alongside official employment statistics, wage data and surveys of employers. Seasonality is another trap.
Hiring advertisements usually rise before the holiday season and in the spring, so a jump in a single month may be normal, and analysts compare each month with the same month a year earlier or use seasonally adjusted figures. A three-month average also smooths out the noise from one-off events such as a large employer's recruitment drive.
In practice
Real-world examples.
Example
A retail chain's finance director notices the index rising for four months in a row. She expects wage demands to increase and brings forward seasonal hiring, offering a $500 sign-on bonus before rivals do the same.
Example
A central bank economist studies the index alongside unemployment claims. A sudden fall in advertisements makes her suspect that hiring is slowing before the official employment figures show it.
Example
A recruitment agency uses the index to decide where to expand. It sees that vacancies in healthcare are growing much faster than the average, so it assigns more consultants to that area and sets higher fee targets. Six months later, placements in that field are up 25% on the previous period.
Formula
Calculation
Index value = (job advertisements in the current period / job advertisements in the base period) x 100
Suppose that in the base month an online survey counts 3,500,000 advertised vacancies, and in the current month it counts 4,200,000.
Step 1: Divide current by base: 4,200,000 / 3,500,000 = 1.2.
Step 2: Multiply by 100: 1.2 x 100 = 120.
The index stands at 120, so advertising is 20% higher than in the base month.
To judge tightness, compare with unemployment. If 6,000,000 people are unemployed, there are 4,200,000 / 6,000,000 = 0.7 vacancies per jobseeker. If a year earlier the figure was 0.5, competition for workers has clearly increased.Case study
Seen in the real world.
Calder Staffing is a fictional agency with 80 recruiters and monthly revenue of $2,400,000. Its finance team tracked a help wanted style index and noticed it had fallen 15% over three months while the agency's own pipeline still looked healthy.
Treating the index as an early warning in this illustrative case, management froze hiring of new recruiters and shifted spending to temporary staffing, which tends to hold up better. Placement fees fell about 10% over the following two quarters, but because costs had been held back the agency stayed profitable. The finance team now reviews the index every month, alongside its own pipeline report, and uses a fall of more than 10% over a quarter as a trigger for a cost review.
Watch out
Common mistakes.
- Assuming that a high index always means a healthy economy, when it can also reflect a shortage of skills that holds back growth.
- Comparing figures from different versions of the index as if they were measured in the same way.
- Relying on it alone, when it needs to be read with unemployment, wage and survey data.
Questions
People also ask.
Is the Help Wanted Index a leading indicator?
It is generally treated as one, since hiring plans appear in advertisements before they show up in employment totals.
Who publishes it?
Versions have been published by different organisations over time, so check the current publisher and method before using a particular series.
What is a vacancy rate?
It is the number of unfilled jobs divided by total jobs, which is a related measure of how hard it is for employers to recruit.
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