I wrote a report on US Monster Employment Index for the business class I took at UC Berkeley Extension.
The U.S. Monster Employment Index is a monthly analysis of U.S. online job demand conducted by Monster Worldwide, Inc. (www.monsterworldwide.com), the parent company of Monster.com. Since my report was to explore less-used indices, I thought it would be interesting to see if the US Monster Employment Index exhibits the same characteristics as the US Help-Wanted Advertisement Index. As more and more employers move their hiring ads online, the Monster Index may tell us something different. You can see the part of my report on Monster Index at the end of the blog.
The report was written in March and more than a half year has passed. It is time to revisit my forecast and see how US economy is doing. Earlier this year, the ever rising price of oil was already a known problem. The potential ramification of US sub-prime mortgage was merely on the radar screen. Nevertheless, the US economy was strong. I predicted the Monster index for March to be 181, yet the actual number was 185, a more than 12% year-to-year increase. It was stronger than I have expected. The index topped in May to 189 and stagnated since then. As the Monster Index is not seasonally adjusted, the month-to-month change does not provide much insight into any short-term significance. The trend of year-over-year changes, however, has been on a consistent downhill slope, from 25% in January 2006 to 9% last month. Isn't a year-over-year increase good enough, even in single digit? Let's say, if the index stays at 190 until February 2008, the year-over-year change will still show a gain higher than 7%, while the index is not gaining anything. It is practically stagnant.
Is recession near? In February, former Federal Reserve Chairman Alan Greenspan warned that the US economy may fall into recession by the end of 2007. Mr. Greespan modified his tone a little bit in the past few months. Current Chairman Ben Bernanke expected a soft landing. If the Monster Index is telling us anything, it looks like Mr. Bernanke will not get an immediate recession, at least for the next few months. Whether Mr. Bernanke will get what he hoped for a soft landing, the Monster Index is still too young to tell.
Part of my report on US Monster Employment Index, written in March, 2007
The U.S. Monster Employment Index depicted in the following diagram shows the monthly index values for the past year. The values are not seasonally adjusted due to the short history of Monster Employment Index.
Figure 1: U.S. Monster Employment Index Jan 06 to Feb 07
The U.S. Monster Employment Index increased nine points in February to 177, which is the highest level since its inception. It was contributed by a strong and broad increase in online recruitment for workers across the United States. During the month of February, 19 of 20 industries, and all nine U.S. Census Bureau regions reported increased online job availability. The Index’s year-over-year growth rate also edged higher to a total of 20 points or 12.7 percent. It was however a slower rate compared to February 2006 year-over-year growth, which scored 35 points or 28.7%.
It was a sign of relief to see such a sharp growth in February. This gain compensated the weaker-than-usual growth in January as December was usually the weakest month of online recruitment from Monster’s historical data. The monthly percentage change may give an impression that the online job demand is increasing by leaps and bounds. However it was more of regaining ground for which was lost in December 2006 when the index recorded the deepest December drop since 2003. The overall moderating trend was also observed in the 3-month moving average index values and year-over-year change curve. The 3-month moving average is stagnant since August 2006 and the year-over-year change slows down steadily.
Monster started to report U.S. online employment index as U.S. came out of last economic trough for about two years. The U.S. economy was moving from recovery into expansion mode at that time. For the past three years, U.S. Monster Employment Index has demonstrated a consistent growth pattern which coincided with U.S. economic expansion. The index has never seen a significant or prolonged decrease since its inception. Nevertheless, this growing trend started to show moderation in early 2006 and became stagnant late last year.
Our estimate for March 2007 is the index will report a mild increase that follows the trend throughout the past year. If we follow the moderating nature of the year-over-year change for the next release and use a number between 10% and 11% as an estimated rate, the index value for March 2007 will be around 181, a monthly change of roughly 2%. Since the U.S. Monster Employment index is not the most anticipated economic index among the market participants, there is no consensus estimate available for comparison.
Monster Employment Index is similar to the Help-Wanted Index, but instead of using newspaper ads, Monster index is collected based on online postings. It may have a similar, leading indicator characteristic as the Help-Wanted Index that it tends to peak before the economy peaks. As the market looks for signs for the direction of economy, a stagnant or even a decreasing employment index will weigh in on the opinion that the economy is close to the turn from peak to recession.
