Written by Steven Hansen
The Conference Board’s Employment Trends Index – which forecasts employment for the next 6 months – declined. This is the problem with trend based indexes at turning points.
Econintersect has already forecast slowing jobs growth.
From the Conference Board:
The Conference Board Employment Trends Index™ (ETI) declined slightly in March. The index now stands at 127.65, down from 127.77 in February. However, that still represents a 5.6 percent gain in the ETI compared to a year ago.
“The growth in the Employment Trends Index slowed down in the first quarter of 2015,” said Gad Levanon, Managing Director of Macroeconomic and Labor Market Research at The Conference Board. “The combination of the disappointing March employment report and the recent weakness in the ETI suggests that the likelihood of a slowdown in employment has increased. Even so, it is unlikely that job growth in the second quarter would fall much below the trend of 200,000 jobs per month.”
In March, the negative contributions from Percentage of Firms with Positions Not Able to Fill Right Now, Ratio of Involuntarily Part-time to All Part-time Workers and Percentage of Respondents Who Say They Find “Jobs Hard to Get” more than offset positive contributions from the remaining five components.
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.
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 .mployment 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)
employment_indices.png
The graph above offsets the Conference Board ETI by 5 months. Note that both the Conference Board and the Econintersect indices are showing an improving long term trend – however the Conference Board ETI trend line is slowing whilst the Econintersect trend line is not.
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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