Using Job Postings to Measure Employment Demand

An article in the Harvard Business Review recently touched on Why Job Postings Don’t Equal Jobs, explaining that these data should be considered unreliable when trying to estimate job demand under various circumstances. Specifically:

  • Professional-type jobs are more likely to be posted online
  • Companies often advertise the same job multiple times, and
  • For job boards that require payment to post openings, firms may post more openings when there is a discount offered, whether or not they currently need those workers.

A few additional concerns were not mentioned in that article:

  • Some jobs are posted for legal reasons, such as firms sponsoring foreign workers for permanent residence (green card). Firms have to “test” the labor market by advertising those jobs even though they have hired a foreign worker already and have no intention of hiring someone else. Most of these cases are professional jobs as well.
  • The methods used to collect and clean online postings and estimate trends over time can be problematic.

The methods used to obtain and clean job postings data are varied and are typically closely guarded. For an objective review of several providers of these data, see the Vendor Product Review:  A Consumer’s Guide to Real-time Labor Market Information. Vendors scrape and spider job boards automatically and manually, code results into anywhere from 5 to 70 data elements, and deduplicate 60 to 90 percent of job ads. Based on around 4 million job postings daily, and assuming ads are only duplicates (not triplicates, etc.), that could mean anywhere from 1.2 to 1.8 million job postings are thrown out as duplicates every day.

Methods for analyzing the postings range from keyword searches to natural language processing and text analytics, but small details in methodology can have outsized effects on what gets counted. Take, for example, the difference between searching job postings on Indeed.com for registered nurses using different keywords such as “rn,” “registered nurse,” or “registered nurses.”

Job Trends from Indeed.com

Source: Indeed.com

This simple search raises a few questions:

  • Which keyword or collection of search terms best represents job postings for registered nurses?
  • Do the keyword results change by region? 
  • In another field, how might different data providers distinguish between R, the statistical programming language, and H.R. (Human Resources) or R&D (Research & Development)?

The answers to these types of questions will likely vary by data provider and should be considered before relying on the data for analysis.

Many providers make a concerted effort to improve collection, parsing, and deduplication methods; however, significant changes in methodologies can cause additional confusion and inconsistency in job advertisement data if used in analysis over time. Changes to the deduplication methodology used by The Conference Board, for example, resulted in revisions lowering estimates by about 460,000 jobs for every month in the series. The overall curves were fairly consistent, showing similar shape and trends, but anyone relying on the actual levels for measuring or forecasting employment demand could find old estimates too high by hundreds of thousands of jobs.

Impact of revisions, HWOL data series

In summary, the use of online job postings data to glean labor market information is promising, but there are a number of concerns that suggest these data are not sufficient replacements for traditional labor market data.

Research assistance for this post was provided by Patrick Clapp.

Economic Impact: When will the Fed raise rates?

After six years of an essentially zero percent federal funds rate target, it looks like rates will begin increasing soon.

The timing of that rate increase is based on the current and future strength of the economy.

However, we get clues about when the rate increase will occur from speeches and interviews of voting members of the Federal Open Market Committee, which is the Federal Reserve’s policy-making committee.

Federal Reserve Chair Janet Yellen reaffirmed in a speech about 10 days ago that she believes it will be appropriate to raise rates this year.

“If the economy continues to improve as I expect, I think it will be appropriate at some point this year to take the initial step to raise the federal funds rate target and begin the process of normalizing monetary policy,” she said in her speech.

But she is not the only voting member.

For instance, Fed Governor Daniel Tarullo takes an opposite view of when to raise interest rates.  “In my view, it likely will not be appropriate to begin raising the federal funds rate until sometime in early 2016,” he said in a presentation May 4.

Richmond Fed President Jeffrey M. Lacker, a voting member this year of the FOMC, was quoted by Reuters last week saying, “What I’ve said is that a case might be strong in June. I still think that’s possible. But as I said . . .I haven’t made up my mind yet about June.”

The upcoming rate increase is good news.

It means that the FOMC members believe the economy is strong enough to continue growing with higher interest rates. Yet, policy makers also are concerned that a premature rate increase could dampen the recovery if it is still not strong enough.

The rate hike also is great news for savers. When the Fed raises the federal funds rate target, which is the rate that banks use when they borrow from each other on an overnight basis, banks then increase the rate they pay depositors.

The iMoneyNet money fund average, the seven-day average yield over all taxable money market funds, is currently  0.02 percent in the nation. Late in 2008, when the federal funds rate target was 0.50 percent, the money fund average was 1.22 percent.

Some analysts believe that the federal funds rate target will eventually get back to a more normal rate of 3 percent over the next two years. If historical relationships hold true, savers will see a money fund average around 3 percent as well. This would certainly help retirees who are on a fixed budget.

On the other hand, borrowers will find that it costs more to get a home mortgage or to use a credit card.

The interest rate on many loans is tied to either the prime lending rate or LIBOR. The prime rate is currently at 3.25 percent and the one-month LIBOR is 0.18 percent.

In 2008, we saw how quickly the prime and LIBOR rates fell when the Fed dropped the federal funds rate.

While the federal funds rate target stood at 3 percent in February 2008, the prime rate was 6 percent and the one-month LIBOR rate was 3.14 percent. It dramatically changed by November, when the federal funds rate target was 0.50 percent and the prime rate was 4 percent and the 1-month LIBOR rate was 1.44 percent.

Longer-term interest rates also typically rise with increases in the federal funds rate, but are more dependent on inflation expectations.

The average rate for a 30-year fixed mortgage was 3.87 percent as of Thursday, up from 3.84 percent a week earlier and matching the level at the end of 2014, mortgage lender Freddie Mac said. The average 15-year rate increased to 3.11 percent from 3.05 percent.

A forecast from Chmura Economics & Analytics expects the 30-year fixed mortgage rate to rise to 6 percent by the end of 2016.

For now, it looks like higher interest rates are still possible by year’s end.

As many Fed officials say, the exact time of liftoff is data dependent. But it’s important to track FOMC member comments because not everyone interprets the data the same way.

Economic Impact: Wage Gains Remain Elusive

Slow wage growth is one of the side effects of a weak labor market. Even though the U.S. unemployment rate has fallen to 5.5 percent in February, the rate that includes people working part time who would rather work full time and the marginally attached is 11.0 percent. With plenty of jobseekers to choose from, firms have been stingy with wage increases. From 2009 (the year the recession ended) through 2014, annual average wages in the Richmond metro area rose 1.7 percent.

The RIGHT Data

The internet has become a widely used source of data for regional labor market information, but that doesn’t always mean it provides the level of detail needed to make reliable decisions.