Help-Wanted Index (HWI)

The Help Wanted Index (HWI) is an index that measures the number of help-wanted job advertisements posted in major national newspapers in the United States each month.

It was created in 1951 by the Conference Board, which is a non-profit research organization that provides economic data and analyses on indicators around consumer confidence, employment trends, and more. 

The help wanted index was restructured in 1987 for the index to equal 100 for a selected base month.

The index can be made more complex by considering other relevant variables, such as population size. 

The help wanted index reveals the number of open job positions, which reflects the general strength of the labor market. 

It provides vital insights into employment data and related factors such as:

• Changes in demand for workers/employees, demand for various goods and services, and overall economic activity and growth
• The efficiency of the job search and matching procedure
• A measure of how many positions remain open, seeking new workers for a prolonged period
• Insights into the state of the economy (labor demand and recessions/recoveries)

However, the help wanted index is a measure based on only the job opening advertisements listed in newspapers. Therefore, it does not account for open job positions listed online.

Calculating the Help Wanted Index

The HWI and the change in index value in a future month can be calculated after following two simple steps as listed below:

1. A base month is chosen, and an average number of help-wanted ads in newspapers is assigned an index value of 100. 
2. Looking at the values for future months, the change in the index value is calculated by dividing the average number of help-wanted advertisements by the average number in the base month. Then, this value is multiplied by 100 to determine the change.

For example, consider the base month to be January and that there are 1,600 help-wanted ads. Since it corresponds to the base month, it can be assigned an index value of 100. 

Hypothetically, consider the average number of help-wanted ads in newspapers in February to be 1,900 ads. 

So, then the HWI in February is calculated as (1,900/1,600) x 100 = 119

The index has increased and is thus higher than it was in the base month, showing the increase in job postings.

Meanwhile, if the number of help-wanted advertisements decreased after a few months, it would show a decrease in the index. 

For example, assume the average number of help-wanted advertisements declined to 1,400 ads in May. 

This would correspond to an HWI calculation of (1,500/1,600) x 100 = 94

The index has decreased and is thus lower than it was in the base month. If it continues to drop and does so rapidly, it may indicate a recession coming to the economy. 

Understanding What the Help Wanted Index Tells Us 

Some of the concepts to understand are:

High Index:

• Indicates there are several open job positions available --> many are seeking new employees
  • Individuals in the labor market have more options in choosing a job position. 
  • May push firms to increase wages and salaries.
    • Employers may have to increase wages to attract workers, which can cause wage inflation.
    • This can potentially affect equities and bonds negatively as interest rates may rise as a result of the inflation
• As HWI increases → more and more job positions are opening up
  • Decreasing unemployment/Increasing employment in the economy
  • It may also show signs of a potential economic recovery.
    • As more workers fill open positions, economic activity and production rise → employers hire more workers and post more job advertisements → possible shortage of workers.

Low Index:

• Indicates there are few open job positions --> not many employers are looking to hire new employees. 
  • Increasing unemployment/Decreasing employment

• HWI decreases as the economy goes into recession (or the HWI falling over a continuous period can be a potential sign of one coming)
  • Economic activity and output produced by various firms go down, so employment decreases.
    • Less demand for workers, so many become laid off or fired, and employers become less likely to want to hire 
      • Fewer available job positions (help-wanted ads) posted
• It keeps decreasing until the economy recovers

Limitation

As the Internet began gaining popularity and relevance in individuals' everyday lives, it has also impacted open job postings and searches. 

So, there has been a shift in publishing help-wanted advertisements from solely being written in newspapers to being put up online on different websites and sites like Indeed, Handshake, Monster, LinkedIn, and even Google. 

These online advertisements are not considered in calculating the help wanted index. Thus, it does not capture the most accurate picture of help-wanted advertisements and labor demand in the economy and is not as commonly used by economies today. 

Nonetheless, several major newspapers continue to be printed and read. So, these newspapers continue to publish job advertisements as it does gain traction among the public and help many find new job opportunities. 

For example, Canada stopped using and developing the HWI in 2003 as they perceived that the index lost its relevance in depicting unsatisfied labor demand because of the Internet.  

For instance, when the average number of help-wanted advertisements in monthly newspapers decreases, it may push individuals or economies to think a recession may arise.

However, it may be that more advertisements are being posted online, not necessarily a decrease in ads in the overall economy, but rather a transition to more being broadcasted on the Internet.  

So, instead, there is a separate index that focuses on these Internet advertisements and tracks online labor demand, which is the help-wanted online index (HWOI). 

Summary

• The Help Wanted Index (HWI) is an index that was established by the Conference Board and recorded the number of help-wanted job advertisements that are posted in national newspapers in the United States monthly.
• The index reveals important economic employment data with the average number of jobs advertised. So, it helps track changes in labor demand in the market and the process through which potential employees find suitable jobs from newspaper ads. 
• As it decreases, there are fewer ads for open job positions for potential workers. So, unemployment increases, and production may slow down, suggesting that a recession is coming and vice versa when it rises. 
• An important limitation of this index is that it only tracks help-wanted ads printed in newspapers and does not consider those posted online, which is why it has become less relevant and utilized in some economies today. 

Researched and authored by Laila Al-Eisawi | LinkedIn

Edited by Abdul Aziz Rasheedy | LinkedIn

Free Resources

To continue learning and advancing your career, check out these additional helpful WSO resources:

• Laspeyres Price Index
• Standard of Living
• Underemployment
• Unemployment
• Utility Theory