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 “slower economic activity, tighter labor markets and higher labor costs are likely to lead to weaker job growth in 2019“.
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 decelerated 0.2 % month-over-month but grew 4.4 % year-over-year. The Econintersect employment index was relatively unchanged.
From the Conference Board:
The Conference Board Employment Trends Index™ (ETI) declined slightly in November, following an increase in October. The index now stands at 110.41, down from 110.73 in October. The change versus a year ago, however, remains positive with a 4.4 percent gain in the ETI.
“The Employment Trends Index declined slightly this month and shows some moderation after reaching its highest point so far in August,” said Gad Levanon, Chief Economist, North America, at The Conference Board. “The gloom and doom views infecting the financial markets are an exaggeration. However, slower economic activity, tighter labor markets and higher labor costs are likely to lead to weaker job growth in 2019. Jobs should continue to grow, causing faster wage growth which may in turn increase inflation pressure, and ultimately result in a moderation in employment growth by the end of 2019. As a result, we expect the Federal Reserve to raise rates this month and possibly three more times in 2019.”
November’s decrease in the ETI was fueled by negative contributions from three 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, Initial Claims for Unemployment Insurance, and the Percentage of Firms With Positions Not Able to Fill Right Now.
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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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