Are Small Businesses Starting to Hire Again?

Some statistical analysis says yes:

The HAI [Hiring Activity Index] is essentially a measure of how actively our [Criteria Corp’s] customers (made up mostly of SMBs of between 10 and 500 employees) are administering pre-employment tests through our system (and presumably, therefore, hiring) . . . the HAI is the percentage of our customers who are actively hiring (administering tests) in a given month. From January 2008 (when we began tracking the HAI) to October 2008 the HAI remained very steady, within a few points of 65%. (If this seems low, consider that even in the best of times many 30 or 40 person companies will not be hiring every month.)

But as the financial markets plummeted and the unemployment rate surged in November, the HAI sunk about ten points, and by January reached its lowest level since we started tracking it, 53.28%. . . . So I [Josh Millet] was very pleasantly surprised to see a fairly strong uptick in the HAI in February, to 61.41%. It is only one data point, to be sure, but it suggests that for SMBs the hiring picture improved somewhat in February. Could it be an upwards blip in a downward trend? Of course, but the eight point jump in the HAI is the biggest we’ve seen since we started tracking the index. For those, like me [Millet], inclined to think that the current recession, although brutal and severe, will not be as long-lasting as some suppose, the February HAI reading is cause for hope. . . . Small and medium-sized businesses did not lead us into this recession, but they may just lead us out of it–and don’t look now, but it may have already started.


I assume they’ve done some simple checks with the data and made sure that this isn’t some computer glitch, for example a problem with the software causing a bunch of these things to be counted twice, or some change in the calculation or the population of users so that the denominator suddenly changed?

I won’t even try attempt to evaluate this–as I never tire of reminding people, my last econ class was in 11th grade–I’m just throwing this out there, first as an interesting example of a Freakonomics-style index and second as potentially important economic news. Again, I’ll leave it to others to judge this.

It could be an interesting and important project (an econ M.A. thesis?) for someone to put together a whole bunch of this sort of measure to get some sort of aggregate that could be useful in monitoring aspects of the economy not captured by traditional statistics.

3 thoughts on “Are Small Businesses Starting to Hire Again?

  1. My favorite "odd" indicator of the economy, which I've been using for many years, is how early rush hour over the San Francisco Bay Bridge (from Oakland/Berkeley) starts in the morning.

    One could create a metric by tracking the time of day when the metering lights went on; I suspect those numbers are kept around somewhere. Hmmm, maybe I'll try to find out!

  2. I wondered a bit too. It's possible that either:

    a) because of the downturn, companies who were not hiring are less likely to keep their "subscription" (is it a subscription? seems like it…) active,


    b) higher unemployment means there are applicants (and therefore test-takers) for positions that otherwise might not have had any applicants.

    That said, it does seem like it could be a really nifty leading indicator, sort of like requests for I-9 forms from DHS.

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