Written by Steven Hansen
The Conference Board’s Employment Trends Index – which forecasts employment for the next 6 months – strengthened in December 2013.
The Conference Board believes future employment growth will likely be solid in the coming months – while Econintersect‘s own employment index is saying that economic pressures will continue to be weak but the trend will reverse in the next few months.
From the Conference Board:
The Conference Board Employment Trends Index™ (ETI) increased in December. The index now stands at 115.76, up from 115.72 (an upward revision) in November. The ETI figure for December is 5.2 percent higher than a year ago.
“Despite the disappointing job numbers for December, the improvement in the Employment Trends Index is signaling solid employment growth in the months ahead,” said Gad Levanon, Director of Macroeconomic Research at The Conference Board. “With the labor force barely growing, partly due to the massive wave of baby boomers retiring, this job growth will continue to rapidly bring down the unemployment rate.”
December’s increase in the ETI was driven by positive contributions from six of its eight components. From the largest positive contributor to the smallest, these were: Number of Temporary Employees, Consumer Confidence Survey® Percentage of Respondents Who Say They Find “Jobs Hard to Get,” Job Openings, Industrial Production, Real Manufacturing and Trade Sales, and Percentage of Firms With Positions Not Able to Fill Right Now.
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.
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 continuing to weaken over the next month or so but the trend will reverse after that.
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.