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Monday, March 16, 2009

The Hiring Activity Index

Andrew Gelman sends this along:

Are Small Businesses Starting to Hire Again?, by Andrew Gelman: Some statistical analysis says yes:

The HAI [Hiring Activity Index] is essentially a measure of how actively our [Criteria Corp's] customers (made up mostly of SMBs of between 10 and 500 employees) are administering pre-employment tests through our system (and presumably, therefore, hiring) . . . the HAI is the percentage of our customers who are actively hiring (administering tests) in a given month. From January 2008 (when we began tracking the HAI) to October 2008 the HAI remained very steady, within a few points of 65%. (If this seems low, consider that even in the best of times many 30 or 40 person companies will not be hiring every month.)

But as the financial markets plummeted and the unemployment rate surged in November, the HAI sunk about ten points, and by January reached its lowest level since we started tracking it, 53.28%. . . . So I [Josh Millet] was very pleasantly surprised to see a fairly strong uptick in the HAI in February, to 61.41%.

It is only one data point, to be sure, but it suggests that for SMBs the hiring picture improved somewhat in February. Could it be an upwards blip in a downward trend? Of course, but the eight point jump in the HAI is the biggest we've seen since we started tracking the index. For those, like me [Millet], inclined to think that the current recession, although brutal and severe, will not be as long-lasting as some suppose, the February HAI reading is cause for hope. . . . Small and medium-sized businesses did not lead us into this recession, but they may just lead us out of it--and don't look now, but it may have already started.

I couldn't resist taking the horrible table that was posted and making a simple graph:


I assume they've done some simple checks with the data and made sure that this isn't some computer glitch, for example a problem with the software causing a bunch of these things to be counted twice, or some change in the calculation or the population of users so that the denominator suddenly changed?

I won't even try attempt to evaluate this--as I never tire of reminding people, my last econ class was in 11th grade--I'm just throwing this out there, first as an interesting example of a Freakonomics-style index and second as potentially important economic news. Again, I'll leave it to others to judge this. ...

I can think of some stories why this might occur even though there's no change in the employment outlook, e.g. small to medium size employers who had to take whatever they could get when the economy was booming due to competition from larger, higher paying firms can now be more selective, changes in the number or composition of firms in the index (as Andrew notes). My instinct is to discount it, especially since there's not enough data to judge the typical level of volatility in the series, but what do you think? Is this meaningful?

    Posted by on Monday, March 16, 2009 at 10:35 PM in Economics, Unemployment | Permalink  TrackBack (0)  Comments (6)


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