Gallup’s Job Creation Index is a weekly statistic based on telephone interviews with approximately 4,000 working adults. The index in constructed by subtracting the percentage of workers who say their employer is letting people go and reducing the size of its workforce from the percentage who say their employer is hiring new workers and expanding the size of its workforce. As such, if all respondents said that their employer was hiring, the index would be 100. If, on the other hand, all of the respondents said that they were reducing employment the index would be minus 100. Gallup started publishing the index at the beginning of 2008, when the country was in recession. As such, the highest level the index has reached is only 28 (the first reading in January 2008), and the lowest has been -11 (April 2009). Gallup publishes a monthly report outlining more detail than is presented in the weekly index number.
In July (the August report), according to Gallup, the index was steady at +21, similar to +22 in June. Private sector employees, and state and local government workers, reported little change in net hiring at their workplaces, however, federal workers reported a significant decline reflecting the continued effect of the sequester. In fact, according to Gallup, the index for federal hiring fell from -10 in June to -17 in July. Over the same period, non-government hiring has been relatively flat, generally at or above +20.
Regional index numbers shows that hiring has increased the most in the West, rising from +13 to +24, while it has modestly improved in the South, while in the East, hiring is down slightly.
The Gallup index provides information before it becomes available in government indicators. It also tracks fairly well with the official unemployment and employment statistics (although the series is fairly short). Overall, the Gallup index confirms that while the economy is growing and firms are hiring, they are doing so at a slow pace. Net government employment (federal and local) is fairly flat, with growth in state and local jobs being offset somewhat by federal layoffs. What the index does not show is any information on the quality of the jobs. If (as has been indicated by BLS and Census data), most new jobs are part time, the overall effect on the economy and the true jobless rate of even sustained hiring would be muted.
This indicator, in conjunction with the other employment indicators published over the past quarter, does not bode well for overall economic activity. Even though the Gallup index has shown overall hiring for the past 3.5 years, the level has never reach that of January 2008, which was during the recession. Businesses should consider this in their planning, particularly if they rely on consumer spending or employment growth as an element of their demand equation.