Written by Steven Hansen
The May BLS non-farm employment growth was originally reported at 69,000 – but now the BLS says it really was 105,000. Now June’s employment gain was reported at 80,000 which is less than the current last month’s numbers of 105,000.
Should we compare 69,000 or the 105,000 to the 80,000? It makes a big difference as analysts trend data. Is the trend up or down. To add humor to the situation, in the May 2012 (last reporting month) employment trends (ETI) report, the Conference Board stated:
While growth in employment has slowed significantly in recent months, the Employment Trends Index does not signal further slowing in the coming months.
Today the Conference Board reported their June 2012 employment trends index fell marginally. This index is now saying employment growth will be slow through the summer according to the index authors.
The Conference Board Employment Trends Index™ (ETI) dipped to 107.47 in June, down from the revised figure of 108.23 in May. The June figure is 5.6 percent higher than a year ago.
“The Employment Trends Index has been flat since February, suggesting that slow employment growth is likely to continue through the summer,” said Gad Levanon, Director of Macroeconomic Research at The Conference Board. “Since there is little hope of acceleration in the pace of economic activity any time soon, these weak labor market conditions are likely to persist for the coming months.”
June’s drop in the ETI was driven by negative contributions from four of the eight components. The declining indicators – beginning with the largest negative contributor – were Percentage of Firms with Positions Not Able to Fill Right Now, Ratio of Involuntarily Part-time to All Part-time Workers, Initial Claims for Unemployment Insurance and Percentage of Respondents Who Say They Find “Jobs Hard to Get.”
To add context to this index, the following graph compares BLS non-farm payrolls and the Econintersect Employment Index to the 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.
Comparing BLS Non-Farm Employment YoY Improvement (blue line, left axis) with Econintersect Employment Index (red line, left axis) and The Conference Board ETI (yellow line, right axis)
The graph above offsets the Conference Board ETI by 3 months. My take is that neither Econintersect or The Conference Board ETI is mimicking the actual BLS jobs data. The Conference Board tries to predict turning points (which it appears to be good at) – but is unable to predict the intensity of the upward or downward movements. Econintersect attempts to predict intensity of movement (which it appears it is much better at than the ETI) – and is predicting a continuing weak labor market (which the labor market until recently has been stronger than Econintersect‘s index would have predicted).
One more kick at the employment situation using ADP vs BLS data.
Total Private Non-Farm Employment – ADP (blue line) vs BLS (red line)
You will note that BLS’s employment has been stronger then the ADP’s number since the beginning of 2011. I tend to trust the ADP number more in real time due the size of backward revision to the BLS numbers.
When the BLS tells you employment gains are xxxx, on what basis does your brain process this number? Is it from the number you heard last month, or the revised numbers this month?
The BLS numbers simply lack perspective, and are too heavily revised to be any use in real time. It does make good fun watching the market reacting to these numbers.
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)
- Percentage of Firms With Positions Not Able to Fill Right Now (© National Federation of Independent Business Research Foundation)
- Number of Employees Hired by the Temporary-Help Industry (U.S. Bureau of Labor Statistics)
- Part-Time Workers for Economic Reasons (BLS)
- Job Openings (BLS)
- Industrial Production (Federal Reserve Board)
- Real Manufacturing and Trade Sales (U.S. Bureau of Economic Analysis)
Unfortunately many of these indices are not accurate in real time being subject to at times significant backward revision.