Hiring Activity Index Ticks Higher Again in March

There was significant interest in my post about the Hiring Activity Index last month, so I thought I’d follow up. The post was even picked up by the widely read blog of Columbia University statistician Andrew Gelman, who made a chart out of the horrible table I posted (mea culpa). There were some great comments on Dr. Gelman’s blog about the possible utility and limitations of the HAI as an economic indicator, some of which I’ll address in a second. After Dr. Gelman featured our post it was subsequently picked up in a widely read economics blog written by a University of Oregon economist and then again here too.

It’s cool to see that smart people find our data interesting, and so we wanted to provide an update and some more information on the HAI. First, the update. With the final March numbers now in, the Hiring Activity Index nudged upwards very slightly again this month, to 62.3% from 61.4% in February. To me, this is an encouraging sign that the February jump in hiring activity by small businesses was not just a blip. If the data we’re seeing means anything, the hiring situation for small and medium-sized businesses has begun to rebound.

There were some interesting comments and questions about the HAI and its potential utility as a leading economic indicator. We do sell our software on a subscription basis, and someone pointed out that if non-active subscribers didn’t renew because of the downturn, this could artificially inflate the HAI because it is based on the percentage of our customer base that is actively doing pre-employment testing in a given month. This is a legitimate point, but I will say that while low levels of use are a reason that customers sometimes do not renew, we haven’t see non-renewal rates climb much since November when the HAI dropped by 10 points. It was also suggested that higher numbers of job-seekers may result in applicants for positions that may not have been desirable previously–this is theoretically possible, but I don’t see much evidence for it. What is most certainly true is that companies are getting far more applicants per open positon, as I previously blogged about here. However, since the HAI is based on the percentage of companies testing in a month, not the overall volume of tests, this shouldn’t influence the HAI unduly, and wouldn’t, in any case, explain the plunge in November and (partial) rebound in February.

Hiring Activity Index