Evaluating New LinkedIn Labor Market Tightness Indicators

Three new indicators of labor market tightness have been developed by the LinkedIn platform. These measures, namely the Jobs per Application Index (JPAI), the Jobs per Jobseeker Index (JPJI), and the LinkedIn Hiring Rate (LHR), are designed to provide a more timely snapshot of labor market conditions compared to traditional measures.

The JPAI calculates the ratio of attractive job openings to job applications on LinkedIn, while the JPJI compares the number of attractive job openings to the number of job seekers submitting applications. The LHR measures the percentage of LinkedIn members who added a new employer to their profile, which is then indexed to the average month in 2016.

These new measures have the advantage of being released more quickly than standard labor market indicators, such as the Job Openings and Labor Turnover Survey (JOLTS) data, which typically have a five-week lag. However, it is important to note that these LinkedIn measures may not be fully representative of the entire U.S. labor market, as they only capture jobs posted and applied to on the platform.

To assess the usefulness of these new measures, the study compares them to existing labor market tightness indicators, such as the vacancies-to-unemployment (V/U) ratio and the hires rate from JOLTS. The findings indicate that the JPJI closely tracks the V/U ratio, with a correlation of 0.733. Similarly, the LHR and the JOLTS hires rate demonstrate a strong correlation of 0.95 when analyzing the data from the beginning of 2021, excluding the significant fluctuations caused by the COVID-19 pandemic.

Overall, the LinkedIn measures appear to be valuable tools for predicting wage and price inflation, as they provide a more timely and potentially more accurate reflection of labor market conditions.