The Conference Board's Employment Trends Index - which forecasts employment for the next 6 months declined, but its authors say "ETI's trend suggests that job growth will remain solid in early 2017".
Analyst Opinion of Conference Board's Employment Index
Econintersect evaluates year-over-year change of this index - as we do our own employment index. The year-over-year index growth rate decelerated 0.5 % from last month.
Econintersect is forecasting modest improvement to the growth rate six months from now. Note that the Econintersect Employment Index is not based on employment data.
From the Conference Board:
The Conference Board Employment Trends Index™ (ETI) declined slightly in the final month of 2016, after increasing in November. The index now stands at 129.62, down from 129.93 in November. The change represents a 2.2 percent gain in the ETI compared to a year ago.
"After strong growth over the previous three months, the Employment Trends Index declined slightly in the final month of 2016. However, the ETI's trend suggests that job growth will remain solid in early 2017," said Gad Levanon, Chief Economist, North America, at The Conference Board. "And, employers have become more upbeat in recent months, suggesting the labor market may very well tighten faster than pre-election expectations."
December's decline in the ETI was fueled by negative contributions from five of the eight components. In order from the largest negative contributor to the smallest, these were: Percentage of Respondents Who Say They Find "Jobs Hard to Get," Percentage of Firms With Positions Not Able to Fill Right Now, Number of Employees Hired by the Temporary-Help Industry, Initial Claims for Unemployment Insurance, and Job Openings.
To add context to this index, the following graph compares BLS non-farm payrolls, the Econintersect Employment Index, and The Conference Board ETI. Econintersect uses non-labor and mostly non-monetary economic pulse points in constructing its index, while The Conference Board uses mostly elements of employment data.
The graph above offsets the Conference Board ETI by 5 months. Note that the Conference Board is currently projecting an improving growth rate and the Econintersect index is also showing a marginally improving rate of growth.
A relatively new index is produced by the Federal Reserve.
Users of the LMCI should take note that the entire history of the LMCI may revise each month. Three sources contribute to such revisions. The first source is new data that were not available at the time of the employment report. In particular, at the time of the Employment Situation report each month, the quit rate and hiring rate will be missing for the last two months of the sample because the Job Openings and Labor Turnover Survey is published with a longer lag than the model's other indicators. In subsequent months, as these data become available, the LMCI will revise.
The second source of revision comes from revisions to existing data. Many labor market indicators are subject to revision as additional source data become available or to incorporate annual benchmark revisions or updated seasonal adjustment factors. Prominent examples in the LMCI include the three payroll employment series from the Current Employment Statistics program.
The third source of revision is inherent to the model. The LMCI is derived from the Kalman smoother, meaning that the estimate of the index in any particular month is the model's best assessment given all past and future observations. Thus, when a new month of data is added to the sample, the model will revise its estimate of history in response to the new information. In practice, these revisions tend to be modest and concentrated in the most-recent six months of the sample.
As this index can change so completely each month, we do not believe it can be used to forecast or trend - but is simply presented for reader information.
Comparing the LCMI (blue line, left axis) to Year-over-Year Growth Rate of Non-Farm Private Employment (red line, right axis)
Caveats on the Employment Trends Index
According to the Conference Board:
The Employment Trends Index aggregates eight labor-market indicators, each of which has proven accurate in its own area. Aggregating individual indicators into a composite index filters out "noise" to show underlying trends more clearly.
The eight labor-market indicators aggregated into the Employment Trends Index include:
Percentage of Respondents Who Say They Find "Jobs Hard to Get" (The Conference Board Consumer Confidence Survey
Initial Claims for Unemployment Insurance (U.S. Department of Labor)
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