Written by Steven Hansen
Before analyzing the Conference Board’s December employment index, one more look at last Friday’s BLS jobs report:
- Readers should focus on the trends in the December BLS Jobs report – and they are showing the rate of jobs growth as neither improving or declining, but flat;
- The relationship between the adjusted and unadjusted data seems consistent in December.
Today the Conference Board reported their December 2012 employment trends index posted a “significant increase” – and then went on to talk down the increase.
The seasonal adjusting methodology of the BLS appeared consistent in December. The graph below compares the November to December month-over-month changes since 2004. Note that the relationship between the unadjusted and adjusted data seems consistent across the years compared.
Comparison Unadjusted Private Non-Farm Jobs Growth Between November and December – Unadjusted (blue bars) and Seasonally Adjusted (red bars)
You can see from the blue bars on the below graph, that jobs growth is just under 2% year-over-year growth since 1Q2011. The red line gives you the growth trend – which shows it is neither up or down.
Change in the Rate of Growth Annualized of Private Non-Farm Jobs (red line, right axis) and Year-over-Year Growth (blue bars, left axis)
From the Conference Board:
The Conference Board Employment Trends Index™ (ETI) increased in December. The index now stands at 109.02, up from 108.19 in November. The December figure is 3.1 percent higher than a year ago.
“After posting a significant increase in December, following an upward revision in November, the Employment Trends Index is improving,” said Gad Levanon, Director of Macroeconomic Research at The Conference Board. “However, if economic activity continues to expand slowly in the first half of 2013, it would be difficult for employers to maintain the current rate of job growth.”
December’s rise in the ETI was driven by positive contributions from four of its eight components. The improving indicators — from the largest positive contributor to the smallest — were Initial Claims for Unemployment Insurance, Percentage of Respondents Who Say They Find “Jobs Hard to Get,” Ratio of Involuntarily Part-time to All Part-time Workers and Industrial Production.
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 are 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).
Current Historical Unadjusted Private Non-Farm Jobs Growth Between November and December (Table B-1, data in thousands)
/images/bls non-adjusted change.PNG
The bottom line is that jobs growth will continue, but the rate of growth likely will be poor for the foreseeable future.
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.