Written by Steven Hansen
The Conference Board’s Employment Trends Index for February 2014 – which forecasts employment for the next 6 months – strengthened. What the author’s of this index are not telling you is that the growth rate of this index is decelerating.
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 push better employment in the coming months.
From the Conference Board:
The Conference Board Employment Trends Index™ (ETI) increased in February. The index now stands at 116.39, up from 115.99 (a downward revision) in January. This represents a 4.4 percent gain in the ETI compared to a year ago.
“February’s job report and the ongoing improvement in the Employment Trends Index should provide some relief for those concerned about weakness in the U.S. economy and labor market,” said Gad Levanon, Director of Macroeconomic Research at The Conference Board. “The majority of the ETI’s components have been steadily rising in recent months, suggesting solid job growth will continue in the coming months.”
February’s increase in the ETI was driven by positive contributions from six of its eight components. In order from the largest positive contributor to the smallest, these were: Number of Temporary Employees, Job Openings, Real Manufacturing and Trade Sales, Industrial Production, Consumer Confidence Survey® Percentage of Respondents Who Say They Find “Jobs Hard to Get,” and Ratio of Involuntarily Part-time to All Part-time Workers.
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 YoY Improvement (red line, left axis) and The Conference Board ETI YoY Improvement (yellow line, right axis)
The graph above offsets the Conference Board ETI by 5 months. Econintersect sees employment strengthening beginning in February (red line). Note that the rate of growth of the Conference Board’s Employment Index has been on a general deteriorating trend line since September 2013.
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.