Methodology

The SHRM/Rutgers LINE data are collected through a survey of human resource executives. Data are collected from two samples, HR professionals at manufacturing firms and HR professionals at service sector firms. Because the manufacturing sector is more cyclically sensitive than nonmanufacturing, changes in this sector are often leading indicators of change in the overall economy. Compared with overall employment, employment in the manufacturing sector tends to decline sooner during periods of economic contraction and increase sooner during periods of economic expansion. The service sector is widely viewed as an area where future job growth will occur and is monitored closely for that reason.

Two parallel SHRM/Rutgers LINE indexes are released each month, one for manufacturing and one for the service sector. Each SHRM/Rutgers LINE index is a weighted average of the diffusion indexes for the five components (total employment, total vacancies, recruiting difficulty, new hire compensation and employment expectations). The weights used to calculate the SHRM/Rutgers LINE are: total employment—60%, total vacancies—10%, new hire compensation—10%, recruiting difficulty—10% and employment expectations—10%. Diffusion indexes have been shown to be a useful indicator of economic trends. For each of the components, the diffusion index is the percentage of respondents reporting an increase plus one-half of the percentage reporting no change. A SHRM/Rutgers LINE above 50.0 suggests that manufacturing employment is generally expanding; a value below 50.0 suggests manufacturing employment is generally contracting.

Each sample includes firms classified by their North American Industry Classification System (NAICS). Responses to the survey are weighted by BLS estimates of the percentage of the employment in each subsector.

The weightings assigned to the component indexes are judgmental and preliminary. Once a sufficiently long series of monthly data points is available, regression analysis will be used to estimate the weights that maximize the predictive power of the overall SHRM/Rutgers LINE index. In the interim, users of the data are cautioned to consider the values of the individual components in addition to the overall index.

SHRM/Rutgers LINE data are not seasonally adjusted. We do not have a long enough series of monthly data points to permit us to calculate seasonal adjustment factors. The BLS does publish seasonal adjustment factors for its manufacturing employment series, and users are encouraged to be aware of these factors when interpreting the monthly indexes.

Users of the data should also be aware that many different factors, some of which may be unrelated to any true trend in manufacturing employment, could produce fluctuations in the composite index or its components. The SHRM/Rutgers LINE reflects the experience of a sample of manufacturing firms. Users of this indicator should be very cautious when drawing conclusions about other industries and the overall employment outlook. Users are encouraged to consider the SHRM/Rutgers LINE within the context of other available economic indicators.