Written by Steven Hansen

The Conference Board’s Employment Trends Index for August 2014 – which forecasts employment for the next 6 months – again strengthened. The rate of year-over-year growth improved, and this was the sixth month in a row of improvement in the three month rolling average rate of growth.

The Conference Board believes future employment growth will likely be solid in the coming months – but Econintersect‘s own employment index is saying that economic pressures will not push better employment growth in the coming months. 

From the Conference Board:

The Conference Board Employment Trends Index™ (ETI) increased in August. The index now stands at 121.29, up from 120.62 (an upward revision) in July. This represents a 6.4 percent gain in the ETI compared to a year ago.

“The strong increase in the Employment Trends Index in recent months signals robust job growth through the fall,” said Gad Levanon, Director of Macroeconomic Research at The Conference Board. “The disappointing employment numbers for August seem to be a one-month deviation from a stronger trend.”

August’s increase in the ETI was driven by positive contributions from seven of its eight components. In order from the largest positive contributor to the smallest, these were: Percentage of Firms with Positions Not Able to Fill Right Now, Industrial Production, Ratio of Involuntarily Part-time to All Part-time Workers, Real Manufacturing and Trade Sales, Number of Temporary Employees, Job Openings, 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, 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)

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The graph above offsets the Conference Board ETI by 5 months. Econintersect forecast employment strengthening beginning in February (red line). Note that the rate of growth of the Conference Board’s Employment Index has been in the same range for the last two years – but is currently in an improving trend line.

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.

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