Written by Steven Hansen
The Conference Board’s Employment Trends Index – which forecasts employment for the next 6 months marginally declined with the author’s saying “Despite this month’s decline – the result of just two components – the index remains on a solid upward trend, and has been growing rapidly in recent months“.
Analyst Opinion of Conference Board’s Employment Index
Econintersect evaluates year-over-year change of this index (which is different than the headline view) – as we do with our own employment index. The year-over-year index growth rate accelerated 1.7 % month-over-month and 6.9 % year-over-year.
From the Conference Board:
The Conference Board Employment Trends Index™ (ETI) declined in September, following an increase in August. The index now stands at 110.77, down from 111.18 (an upward revision) in August. The change represents a 6.7 percent gain in the ETI compared to a year ago.
“Despite this month’s decline – the result of just two components – the index remains on a solid upward trend, and has been growing rapidly in recent months,” said Gad Levanon, Chief Economist, North America, at The Conference Board. “The US economy is very strong now. Demand for workers is likely to continue growing rapidly in the coming quarters, but with the unemployment rate now at 3.7 percent, recruiters have their work cut out for them. They will have to bring more people off the sidelines faster. In the meantime, businesses will have to squeeze more out of their current workers, either by increasing working hours or raising labor productivity. Labor market tightness varies across occupations and geographies. However, for the nation we expect the unemployment rate to go down to 3.5 percent or even lower in 2019. We also expect labor force participation and productivity to gradually increase, and wages to further accelerate.”
September’s decrease in the ETI was fueled by negative contributions from two of the eight components. From the largest negative contributor to the smallest, these were: the Ratio of Involuntarily Part-time to All Part-time Workers and the Percentage of Respondents Who Say They Find “Jobs Hard to Get.”
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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.
The graph above offsets the Conference Board ETI by 5 months. Note that the Conference Board is currently projecting an slowing growth rate (and the Econintersect index is forecasting an improving rate of growth over the next six months – but growth slowing at six months out).
Caveats on the Employment Indices
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)
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