Hires

What Are Hires?

Hires, in the context of economics and labor markets, represent the total number of individuals added to a company's payroll during a specific period. This figure is a critical economic indicator reflecting the demand for labor within an economy. As a component of labor economics, the hires data provides insight into the health and expansion of businesses, indicating their willingness and ability to bring on new employees. The U.S. Bureau of Labor Statistics (BLS) collects and publishes hires data as part of its Job Openings and Labor Turnover Survey (JOLTS), a key report that also tracks job openings and separations. Analyzing hires helps economists and policymakers understand the pace of job creation and the overall dynamism of the labor market.

History and Origin

The systematic collection of hires data on a national scale is relatively recent compared to other economic data. The Job Openings and Labor Turnover Survey (JOLTS) program, which provides the primary source of hires data in the United States, began development by the Bureau of Labor Statistics (BLS) in 1998. The goal was to better assess the unmet demand for labor in the U.S. labor market. Data collection, estimation, and analysis for JOLTS commenced in 2000, and the initial data were first released to the public as an experimental series in 2002, with monthly figures extending back to December 2000.¹⁰,⁹ The program transitioned from an experimental series to an official BLS series in 2004.⁸ Before JOLTS, the BLS conducted a similar but less comprehensive Labor Turnover Survey (LTS) from 1959 to 1981, which also included some questions on job vacancies.⁷ The creation of JOLTS marked a significant advancement in providing a more comprehensive and dynamic view of labor market flows, moving beyond just net employment changes to capture the underlying movements of hiring, quitting, and layoffs.

Key Takeaways

• Hires represent the number of new employees added to payrolls over a specific period, serving as a vital measure of labor demand.
• This data is a core component of the Job Openings and Labor Turnover Survey (JOLTS), conducted by the U.S. Bureau of Labor Statistics.
• A rising number of hires typically signals economic growth and business expansion.
• Hires data, alongside job openings and separations, provides a dynamic view of labor market fluidity.
• Analysts use hires data to gauge the health of the economy and to inform monetary policy decisions.

Formula and Calculation

The number of hires is a direct count and does not involve a complex formula. It represents the total count of additions to the payroll during the entire reference month of individuals who were not on the payroll in the previous month. This includes both new employees and rehires.

To calculate the hires rate, the number of hires is expressed as a percentage of total employment for the month.

$\text{Hires Rate} = \frac{\text{Number of Hires}}{\text{Total Employment}} \times 100$

This rate allows for comparison of hiring activity across different industries or over various time periods, regardless of fluctuations in the absolute number of jobs. For instance, the total number of individuals on company payrolls is used as the denominator.

Interpreting Hires

Interpreting the number of hires involves understanding its implications for the broader macroeconomics landscape. A high and increasing number of hires generally indicates a robust and expanding economy, as businesses are confident enough in future demand to expand their workforce. This can lead to lower unemployment rates and potentially wage growth. Conversely, a declining trend in hires suggests a slowing economy or a contraction, where businesses may be hesitant to expand or are facing reduced demand for their products or services.

Economists also look at the hires rate in conjunction with other labor market indicators, such as separations (which include quits and layoffs) and job openings, to get a holistic view of labor market dynamics. For instance, if hires are high but job openings remain elevated, it could suggest a skills mismatch or difficulty in finding suitable candidates, indicating a tight supply and demand for labor.

Hypothetical Example

Consider a hypothetical manufacturing company, "Alpha Innovations," that produces electronic components. In January, Alpha Innovations had 500 employees on its payroll. Throughout the month, the company filled 25 new positions, including engineers, production line workers, and sales representatives.

To calculate Alpha Innovations' hires for January:

1. Identify new additions: The company added 25 individuals to its payroll who were not employed there in December.
2. Total Hires: The number of hires for Alpha Innovations in January is 25.

If we want to calculate the hires rate, assuming total employment at the end of January was 520 (initial 500 + 25 hires - 5 separations, for example), the calculation would be:

$\text{Hires Rate} = \frac{25}{520} \times 100 \approx 4.81\%$

This indicates that approximately 4.81% of Alpha Innovations' workforce consisted of new hires during January, providing a measure of their hiring activity relative to their size. Such an increase in hires might reflect positive business prospects for Alpha Innovations, such as securing new contracts or expanding production capacity.

Practical Applications

Hires data has several practical applications across various sectors of finance and economics.

1. Economic Analysis and Forecasting: Hires data is a crucial input for economists when assessing the current state and future direction of the economy. A consistent trend in hires can signal shifts in the business cycle, informing forecasts for Gross Domestic Product (GDP) and overall economic health.⁶
2. Monetary Policy Decisions: Central banks, such as the Federal Reserve, closely monitor hires data as part of their evaluation of labor market conditions. Strong hiring trends might suggest inflationary pressures, influencing decisions on interest rates and other monetary policy tools.
3. Investment Strategy: Investors and financial analysts use hires data to inform their investment decisions. Industries with consistently high hires may indicate sectors experiencing growth, attracting investment. Conversely, declining hires in certain sectors could signal areas to approach with caution.
4. Workforce Planning and Human Capital Management: Businesses themselves use broader hires data, and their own internal hiring metrics, to understand labor market competitiveness and to benchmark their talent acquisition efforts. This information is vital for strategic workforce planning and developing effective human capital strategies.
5. Government Policy and Programs: Government agencies utilize hires data to identify areas requiring workforce development programs, assess the effectiveness of job training initiatives, and formulate policies aimed at stimulating employment and reducing long-term unemployment. Quality labor market information, including hires data, is essential for informed decision-making in public policy.⁵

Limitations and Criticisms

Despite its utility, hires data, particularly from surveys like JOLTS, has certain limitations and has drawn criticism. One primary critique centers on the potential for job openings to be counted in ways that may inflate the perceived demand for labor. For instance, employers might post jobs proactively to gauge the applicant pool even if they are not actively or urgently trying to fill the position, or they may continually repost positions without changing content, which could be counted as new openings, even if they aren't filled immediately.⁴,³ This can create a discrepancy between the reported number of openings and the actual immediate hiring intent.

Another limitation is that the JOLTS data, including hires, lags other key labor statistics reports, such as the monthly Employment Situation Summary (often called the jobs report), by about a month.², This time lag means that while JOLTS provides valuable detailed insights into labor market dynamics, it may not offer the most up-to-the-minute picture for very short-term market reactions. Furthermore, some analyses suggest that a significant portion of hires occur at establishments that reported zero job openings at the end of the month, potentially indicating issues with how "vacancies" are captured or reported, or simply reflecting rapid hiring cycles.¹ The interpretation of hires data must therefore consider these nuances and be viewed in context with other economic indicators and the prevailing economic conditions.

Hires vs. Layoffs

Hires and layoffs represent opposite movements in the labor market and are key components of labor turnover. While hires refer to the addition of employees to a company's payroll, layoffs signify the involuntary separation of employees from a company.

Confusion between these terms can arise when discussing overall labor market fluidity. Both hires and layoffs contribute to labor turnover, which is the total movement of workers into and out of employment. However, their individual trends offer distinct insights into the health of the economy. A high number of hires combined with a low number of layoffs typically indicates a robust and growing job market, while an increase in layoffs, even if accompanied by some hires, points to potential economic distress or a shift in industry dynamics.

FAQs

What is the significance of hires data?

Hires data is significant because it provides a direct measure of how many people businesses are adding to their payrolls, reflecting the demand for labor. It's a key indicator of economic activity and business confidence, as increasing hires often signal economic expansion and a healthy job market.

How often is hires data released?

In the United States, hires data is released monthly by the Bureau of Labor Statistics (BLS) as part of the Job Openings and Labor Turnover Survey (JOLTS). This monthly release provides timely insights into labor market dynamics.

Is a high number of hires always good for the economy?

Generally, a high number of hires is seen as a positive sign for the economy, indicating growth and job creation. However, the context is important. If high hires are coupled with a high number of quits (voluntary separations), it might suggest a tight labor market where workers are confident in finding new jobs, but it could also signal wage pressures. If hires are high but balanced by equally high layoffs, it indicates high labor turnover rather than net job growth.

How do economists use hires data?

Economists use hires data to analyze labor market trends, assess the overall health of the economy, and forecast future economic conditions. It helps them understand the dynamics of labor demand and supply, identify shifts in industry employment, and inform policy decisions related to employment and economic growth. This data also provides insights into how readily businesses are finding and integrating new talent.