For more than four decades, the "Help Wanted Index" (computed in recent years by The Conference Board, http://www.conference-board.org/) has measured newspaper ads of employment opportunities. It has long proved useful in gauging the economy and in forecasting recessions.

We have recently seen references to the index, noting that it is at the lowest levels in 40 years, and then inferring that recession was likely at hand for this reason. This differs from our analysis, explained below.

The chart that follows shows the Help Wanted Index since 1960, super-imposed on the official recessions^[1] of this period. A cursory glance shows the forecasting value of the index to have been in its sudden declines - not its specific levels - as each and every such change correctly forecast^[2] a recession. There is currently no such sudden decline in progress.

Several important points need to be made:

1. The index has been at "the lowest levels in 40 years" for nearly two years, with no recession occurring, so we still see no forecasting value in specific levels.

2. We would have to see a sudden decline to consider this gauge to be flashing a warning. But, we wonder, is that likely from such very low levels?

3. More importantly - for the first time - there was no recovery in the index after the last recession. In fact, there was a slow, continuing erosion, with some tentative stabilization at today's levels. This is most significant, we believe, as explained in the following.

Numerous economists have noted the "jobless recovery" nature of the current economic rebound, which is generally attributed to the increasing "offshoring" of jobs - manufacturing jobs to China and, more recently, service-sector jobs to India. This has resulted in fewer job opportunities than might otherwise have been the case and, therefore, fewer 'help wanted' newspaper ads.

In addition, there is another new factor this time - the Internet. Over the last five years, there has been a growing use of online 'help wanted' advertising. This, too, has reduced the use of newspaper ads - the question is to what degree, but that answer is unknown.

Conclusion:

The use of 'help wanted' newspaper ads has diminished due to job offshoring and the increasing use of online alternatives. The result is that the interpretation and usefulness of this index has likely been altered in some yet-to-be-determined way. It may take years to determine, or confirm, the interpretation and accuracy of this index.

Like other such indicators before it, its time may have come, and gone. Help Wanted Index - Hail and Farewell!

Footnotes:

[1] The official arbiter of U.S. recessions is the National Bureau of Economic Research (NBER).

[2] NBER declarations of recessions are always after the fact, and often long after. Typically, something like, "The economy entered recession nine months ago." So, even though this gauge appears to have been coincident with the recessions, its signals preceded/forecast the official NBER recognition/declaration by months.