Written by Steven Hansen
The Conference Board’s Employment Trends Index – which forecasts employment for the next 6 months – improved with the authors saying “The economy is likely to add 5-6 million jobs through the end of the year, and the unemployment rate will drop well below 5 percent“.
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 1.9 % month-over-month and a negative 7.9 % year-over-year. The Econintersect employment index is now in positive territory. The Conference Board index is predicting improving job growth 6 months from now. The bottom line is that I doubt you can forecast using traditional methods what employment will look like six months from today as we are living in a whole different world.
From the Conference Board:
The Conference Board Employment Trends Index™ (ETI) increased in February, after an increase in January. The index now stands at 101.01, up from 99.69 (an upward revision) in January. The index is currently down only 7.8 percent from a year ago, which was the last pre-Covid reading.
“The Employment Trends Index increased again in February and signals strong job growth in the coming months,” said Gad Levanon, Head of The Conference Board Labor Markets Institute. “The combination of declining new infections, lower pandemic-related restrictions, households flush with savings, and large government stimulus will all contribute to robust growth in economic activity and employment in 2021. The economy is likely to add 5-6 million jobs through the end of the year, and the unemployment rate will drop well below 5 percent. When the pandemic hit, a tight labor market appeared years away, but it may reemerge as soon as 2022.”
February’s increase was driven by positive contributions from six of the eight components. From the largest positive contributor to the smallest, the components were: Percentage of Firms With Positions Not Able to Fill Right Now; Initial Claims for Unemployment Insurance; Number of Employees Hired by the Temporary-Help Industry; Percentage of Respondents Who Say They Find “Jobs Hard to Get”; Job Openings; and Real Manufacturing and Trade Sales.
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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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