Written by Steven Hansen
The Conference Board’s Employment Trends Index – which forecasts employment for the next 6 months recovered somewhat after the previous month’s crash with the authors saying “Seven of the eight components made positive contributions to the index, suggesting that the number of jobs will grow in the coming months.“
Analyst Opinion of Conference Board’s Employment Index
Econintersect evaluates the 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 by 3.1 % month-over-month and a negative 57.9 % year-over-year. The Econintersect employment index also remains in deep negative territory. Both of these indices are predicting softer job growth 6 months from now – however, because the decline was so rapid, it is likely the rebound will continue for the next few months. The bottom line is that I doubt you can forecast using traditional methods what employment will look like six months from today.
From the Conference Board:
The Conference Board Employment Trends Index™ (ETI) increased in May, following sharp declines in March and April. The index now stands at 46.28, up from 42.53 (a downward revision) in April. However, the index is down 57.9 percent from a year ago.
“The Employment Trends Index increased in May. Seven of the eight components made positive contributions to the index, suggesting that the number of jobs will grow in the coming months,” said Gad Levanon, Head of The Conference Board Labor Markets Institute. “The number of workers returning to work is larger than the number of new layoffs. That was the case in May and will likely be the case moving forward. Just to put things in perspective, the job gains in May recouped just 11 percent of the jobs lost in March and April. Just how much consumers will increase their spending – and how many new workers employers are willing to hire during such uncertain times – remains to be seen. Also, layoffs are far from over. According to a recent survey by The Conference Board, many human resource executives at large companies say their organizations plan on laying off workers in the coming months. By the end of 2020, the employment level in the US may still be 10 million below where it stood in February – a difficult time for the class of 2020 to enter the labor market.”
May’s increase was fueled by positive contributions from seven of the eight components. From the largest positive contributor to the smallest, these were: Job Openings, Initial Claims for Unemployment Insurance, Real Manufacturing and Trade Sales, the Percentage of Respondents Who Say They Find “Jobs Hard to Get,” Industrial Production, the Ratio of Involuntarily Part-time to All Part-time Workers, and the Number of Employees Hired by the Temporary-Help Industry.
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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 6 months.
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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