FRBSF Economic Letter
2005-02; January 21, 2005
Help-Wanted Advertising and Job Vacancies
The job vacancy rate, which represents employers' unmet labor
demand, is an important indicator of the short-term outlook for
hiring and job creation. Because there is no continuous aggregate
vacancy series in the United States, analysts and observers interested
in labor demand and hiring activity have relied on the Conference
Board's "Help-Wanted Advertising Index" to measure changes
in job vacancies over time. This index is based on counts of help-wanted
advertisements in major newspapers nationwide. The information
contained in these series has proved useful not only to economic
forecasters but also to researchers studying aggregate labor market
conditions and performance. For example, using the help-wanted
index, Abraham (1987) concluded that the effectiveness of the job-matching
process between employers and employees in the United States declined
between the 1960s and early 1980s, while Bleakley and Fuhrer (1997)
argued that the effectiveness of job matching rose in the late
1980s and early 1990s.
Due to its reliance on newspaper advertising, however, the help-wanted
index is an indirect measure of job vacancies. The level of job
advertisements appearing in newspapers may change for reasons that
are unrelated to overall labor demand. For example, equal employment
opportunity laws raised the level of newspaper job advertising
in the 1960s and 1970s, while internet job advertising has served
as an increasingly effective substitute for newspaper advertising
in recent years. In this Economic Letter, I discuss how
the help-wanted index can be adjusted for such factors, yielding
a more reliable measure of short-term and long-term movements in
job vacancies. I compare the adjusted help-wanted series to a direct
measure of job openings recently made available by the U.S. Bureau
of Labor Statistics (BLS), through their monthly Job Openings and
Labor Force Turnover Survey (JOLTS). After adjustment, the help-wanted
series confirms the JOLTS series' indication of a recent uptick
in labor demand for the nation as a whole and several broad regions,
although the increase is not yet sufficiently sustained or pronounced
to indicate that a broad employment recovery has fully taken hold.
Adjusting the help-wanted advertising
index
The Conference Board, a not-for-profit business research organization
headquartered in New York City, produces the help-wanted index
(the data are described in detail in Abraham 1987). Briefly,
the help-wanted index is based on a monthly count of help-wanted
advertisements appearing in the classified section of a major
newspaper in each of 51 cities nationwide. Using nonfarm payroll
employment levels as weights, the city data are aggregated up
to provide help-wanted index series for nine major regions and
the United States as a whole (with the series all normalized
to equal 100 in 1987). These series have been available on a
monthly basis since 1951.
It is well known, however, that the level of newspaper help-wanted
advertising responds not just to labor market conditions narrowly
defined but also to extraneous factors that are not directly
related to overall labor demand. These factors include the occupational
composition of employment (white-collar jobs are more likely
to be advertised than blue-collar jobs), increased job advertising
linked to equal employment opportunity pressures, and consolidation
in newspaper markets. Abraham (1987) estimated that these factors
generated an upward drift in the help-wanted index averaging
nearly 1% per year between 1960 and 1985.
Subsequent work using the help-wanted index has relied on Abraham's
approach to enhance the accuracy of the help-wanted index as
a measure of job vacancies, extending her adjustments forward
in a straightforward fashion (for example, Bleakley and Fuhrer
1997). Recent factors, however, including growing reliance on
alternative sources of job advertising such as the internet,
may have produced a downward rather than upward drift in help-wanted
advertising volume. Under these circumstances, a straightforward
extension of Abraham's adjustments may not accurately capture
trends in the help-wanted index that are unrelated to overall
labor demand.
 To address these issues, Shimer (2004) proposed and implemented
a purely statistical approach to adjusting the help-wanted index.
In particular, he used a data-smoothing technique known as the "Hodrick-Prescott
(HP) filter." This technique is commonly applied to economic
data series to remove short-term fluctuations that are associated
with the business cycle, thereby identifying long-term trends.
Figure 1 displays the actual help-wanted series and its long-term
trend as estimated by an HP filter. The actual series exhibits
sharp cyclical swings centered on the shaded recessionary periods.
However, an underlying long-term upward trend is evident through
about 1990. After 1990, a pronounced downward trend was established
and intensified, corresponding to a period when employers increasingly
relied on the internet and sources other than newspapers to post
job openings. These trends are reflected in the peaks in the
data series, which were rising through the late 1980s and fell
subsequently.
Job vacancies
The changing direction and degree of trending in the help-wanted
series indicate the importance of adjusting it for the long-term
influences noted above. However, it is difficult to know
whether these adjustments are informative unless they are
anchored to an independent, reliable measure of job vacancies.
The JOLTS data from the U.S. BLS can be used for this purpose.
The JOLTS is administered to a representative sample of about
16,000 establishments nationwide, and it provides data on
job openings as well as new hires and separations (voluntary
and involuntary). The definition of a job opening (vacancy)
is quite precise, reflecting that: (1) a specific position
exists, (2) work could start within 30 days, and (3) the
employer is actively recruiting from outside the establishment
that has the opening. All types of openings are surveyed,
including part-time and temporary jobs. In addition to the
national series, the data are available by region—the Northeast,
Midwest, South, and West (JOLTS survey information is available
online at http://www.bls.gov/jlt/home.htm; see also Clark
and Hyson 2001). The JOLTS series only became available in
December 2000, near the peak of the last expansion, which
currently limits its use for business cycle analysis. However,
its adjustment pattern since then provides useful information
for assessing the reliability of the help-wanted index as
a measure of job vacancies.
 As Figure 2 shows, when its long-term trend is removed,
the help-wanted series corresponds well to the pattern in
job openings measured directly from JOLTS (the figure displays
monthly values of the JOLTS job opening series, the actual
help-wanted index series, and the help-wanted index series
detrended using an HP filter and adjusted so that its mean
equals the mean of the actual series). Each series is normalized
to a value of 100 in December 2000, so that the series' patterns
can be compared on the same basis over time. After declining
sharply during the recession, the actual help-wanted series
has been largely flat since late 2002. As expected, the downward
trend in the help-wanted series causes it to lie well below
the JOLTS job openings series, while the detrended help-wanted
series lies quite close to the JOLTS series. Looking past
their short-term fluctuations, the movements in the two series
match fairly well, with both showing a slight upward trend
since the middle of 2003.
Additional comparisons (not shown) reveal that the detrended
help-wanted series also does a much better job of matching
the JOLTS series than does the unadjusted help-wanted series
for the four broad regions available in the JOLTS data, although
the match is not as precise as it is at the national level.
Overall, this evidence suggests that the detrended help-wanted
index provides a reasonably accurate measure of changes in
job vacancies, although a more reliable calibration must
wait for the continuation of the JOLTS series across a longer
time period that includes a complete business cycle.
National and
regional labor demand
 In addition to its availability over a lengthy period, the
help-wanted index possesses the advantage of being available for nine broad
regions comprising the entire United States. For visual simplicity, Figure
3 displays the help-wanted series for the four broad regions available in
the JOLTS, which represent combinations of the nine underlying subregions
for which help-wanted data are available (nonfarm payroll employment was
used as the weighting factor to combine values across regions). Each series
is detrended in a manner similar to that used for the national series in
Figure 2. The regional help-wanted series in general display a cyclical pattern
that is similar to the nation's, with each exhibiting sharp declines prior
to the onset of recessions. Although the regional series generally move together,
a notable exception is the decline in help-wanted advertising in the Northeast
region beginning in early 1988, well ahead of the decline in other regions
heading into the recession of 1990-1991.
Consistent with weak payroll employment growth since the end
of the 2001 recession, help-wanted advertising has been largely
flat in the Northeast and has shown only modest recovery in the
other three regions (compared with the recovery in these series
during periods following previous recessions). The aggregation
into broad regions masks some differences across the nine underlying
subregions. Most significantly, the recent gains in help-wanted
advertising in the West have been confined to the Mountain states
(Arizona, Colorado, and Utah), whereas the series has been flat
for the Pacific region (primarily California). This pattern is
consistent with solid payroll employment growth in the Mountain
states and relatively weak growth in California over the past year.
Conclusion
The Conference Board's help-wanted advertising index is a
useful measure of job openings and the state of labor demand in the United
States. Indeed, its availability over a long time period and at the level
of disaggregated regions makes it the only feasible data source for assessing
important aspects of the labor market operations, such as the effectiveness
of the job-matching process. Depending on the intended application, the help-wanted
series may be most useful when adjusted for underlying trends that are unrelated
to labor market conditions; when this is done, the series is quite comparable
to the series on directly measured job openings from the BLS's relatively
new JOLTS database. Once a sufficiently long time series has been established,
the JOLTS series on hiring activity and job turnover will prove useful for
detailed and diverse labor market analyses not currently possible with other
data sources. For the time being, both data sources indicate only a limited
pickup in employers' desired hiring since the end of the 2001 recession,
confirming the generally weak employment growth figures (compared with recoveries
from past recessions) obtained from the BLS's nonfarm payroll employment
series.
Rob Valletta
Research Advisor
References
Abraham,
Katharine G. 1987. "Help-Wanted
Advertising, Job Vacancies, and Unemployment." Brookings Papers
on Economic Activity 1, pp. 207-248.
Bleakley,
Hoyt, and Jeffrey C. Fuhrer. 1997. "Shifts
in the Beveridge Curve, Job Matching, and Labor Market Dynamics." New
England Economic Review (September/October) pp.
3-19.
Clark, Kelly
A., and Rosemary Hyson. 2001. "New Tools
for Labor Market Analysis: JOLTS." Monthly Labor
Review 124(12) (December) pp. 32-37.
Shimer, Robert.
2004. "The Cyclical Behavior of Equilibrium
Unemployment and Vacancies." Mimeo, Department of Economics,
University of Chicago, June 16 (forthcoming in American
Economic Review).
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