Written by Steven Hansen
The Conference Board’s Employment Trends Index – which forecasts employment for the next 6 months – increased with the authors saying “In the past three months, the Employment Trends Index grew much faster than any other three-month period in the history of the index prior to the pandemic“.
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 decelerated 5.7 % month-over-month and a positive 36.7 % year-over-year. The Econintersect employment index is now in positive territory but now declining and we are predicting slowing growth over the next 6 months.
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) significantly increased in May, after an increase in April. The index now stands at 107.35, up from 104.31 (a downward revision) in the previous month. The index is currently up 39.4 percent from a year ago.
“In the past three months, the Employment Trends Index grew much faster than any other three-month period in the history of the index prior to the pandemic. This marked acceleration suggests historically strong job growth in the coming months,” said Gad Levanon, Head of The Conference Board Labor Markets Institute. “Past index data had signaled growing labor shortages, but the most recent data strongly reinforces this trend. Indeed, forty-eight percent of firms reported an inability to fill positions in May’s NFIB survey—an all-time record. Job shortages are likely to be more acute in those states that opened first, less in those that still have restrictions. The labor shortages are causing wage growth to surge. Average hourly earnings in the past two months rose by 7.4 percent (annual rate), which is two to three times the typical growth rate in recent decades. If the current rate of wage growth continues for several more months, it could significantly impact inflation and monetary policy. Toward the end of 2021, labor shortages are likely to ease as some of the labor supply constraints moderate.”
May’s increase was driven by positive contributions from all eight components. From the largest positive contributor to the smallest, the components were: Initial Claims for Unemployment Insurance; Percentage of Respondents Who Say They Find “Jobs Hard to Get”; Industrial Production; Percentage of Firms With Positions Not Able to Fill Right Now; Job Openings; Real Manufacturing and Trade Sales; Number of Temporary Employees; and Ratio of Involuntarily Part-time to All Part-time Workers.
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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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