Written by Steven Hansen
The Conference Board’s Employment Trends Index – which forecasts employment for the next 6 months recovered marginally again after the coronavirus crash with the authors saying “Despite increasing again, the ETI’s July results mark a small improvement compared to the gains made in May and June. The slowing momentum likely resulted from the diminishing impact of the reopening of the economy“.
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 4.1 % month-over-month and a negative 54.8 % 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 July, following increases in May and June. The index now stands at 50.89, up from 49.46 (an upward revision) in June. However, the index is still down 53.8 percent from a year ago.
“Despite increasing again, the ETI’s July results mark a small improvement compared to the gains made in May and June. The slowing momentum likely resulted from the diminishing impact of the reopening of the economy,” said Gad Levanon, Head of The Conference Board Labor Markets Institute. “This stark deceleration represents a preview of what’s to come: Over the next several months, job growth will significantly put on the brakes, likely causing the national unemployment rate to remain in double-digit territory. Less generous government stimulus will dampen consumer spending. In addition, more waves of downsizing and bankruptcies will spur widespread layoffs—and thus further constrain the expansion of the US workforce.”
July’s increase was fueled by positive contributions from six of the eight components. From the largest positive contributor to the smallest, the components were: the Number of Employees Hired by the Temporary-Help Industry; Industrial Production; the Percentage of Respondents Who Say They Find “Jobs Hard to Get;” Initial Claims for Unemployment Insurance; the Ratio of Involuntarily Part-time to All Part-time Workers; and Job Openings.
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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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