Written by Steven Hansen
The ghost of last Friday’s BLS March jobs report still haunts the analysts and talking heads. The Conference Board’s Employment Trends Index – which forecasts employment for the next 6 months – fell slightly in its March 2013 release.
- In an interesting interpretation of their data, the Conference Board insists a decline in index value continues to signal moderate employment growth;
- Econintersect‘s own employment index is saying that employment growth is at the trough of declining employment dynamics – and that employment pressures should lead to better employment numbers in the coming months.
For both the Conference Board and Econintersect, Friday’s BLS jobs report came in well under expectations.
From the Conference Board:
The Conference Board Employment Trends Index™ (ETI) fell in March. The index now stands at 111.20, down from 111.43 (an upward revision) in February. The March figure is 3.7 percent higher than a year ago.
“Despite the decline in March, the Employment Trends index is still signaling moderate job growth in the coming months,” said Gad Levanon, Director of Macroeconomic Research at The Conference Board. “The current trend suggests faster growth than the disappointing increase of 88,000 jobs in March. At the same time, 200,000 new jobs per month in the current economic environment is not in the cards either.”
March’s weakening in the ETI was driven by negative contributions from four of its eight components. The declining indicators — from the largest negative contributor to the smallest — were Percentage of Firms With Positions Not Able to Fill Right Now, Real Manufacturing and Trade Sales, Initial Claims for Unemployment Insurance, and Job Openings.
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 6 months. Econintersect sees employment strengthening over the coming months, while the Conference Board is seeing a slightly weaker jobs situation. Both Econintersect and the Conference Board agree that the BLS jobs report for March was likely an anomaly as it was much weaker than either index would have suggested.
The bottom line is that jobs growth should continue.
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.