Written by Steven Hansen
The Conference Board’s Employment Trends Index – which forecasts employment for the next 6 months – increased with the authors saying “… recruiting and retention difficulties – and rapid wage growth – are expected through the summer, particularly in industries key to the reopening of the economy, such as foodservice and leisure and hospitality. The rapid wage growth is likely to lead to higher inflation in the coming year“.
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 4.2 % month-over-month and a positive 20.7 % year-over-year. The Econintersect employment index is in positive territory but predicting slowier growth than the Conference Board over the next 6 months.
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 with so many jobs going unfilled.
From the Conference Board:
The Conference Board Employment Trends Index™ (ETI) increased again in July, the fifth consecutive monthly increase. The index now stands at 109.80, up from 108.96 (a downward revision) in June.
“The Employment Trends Index remained on its historically strong upward trajectory, suggesting rapid job growth is likely to continue over the next several months,” said Gad Levanon, Head of The Conference Board Labor Markets Institute. “This high mark comes off the back of nearly 1 million new jobs added in both June and July and a steep decline in the unemployment rate. However, recruiting and retention difficulties—and rapid wage growth—are expected through the summer, particularly in industries key to the reopening of the economy, such as food service and leisure and hospitality. The rapid wage growth is likely to lead to higher inflation in the coming year.”
Levanon added: “Despite the still-high unemployment rate, many employers are having difficulty finding qualified workers. According to the National Federation of Independent Business, 49 percent of firms reported being unable to fill open positions in July—an all-time high. For many of those currently unemployed, job-search intensity remains low due to an array of factors: enhanced unemployment benefits, fears of getting infected, a lack of childcare, and interest in pursuing and preparing for a different type of career. Going forward, we do expect economic activity in in-person services to be negatively impacted by the current resurgence of infections fueled by the “delta” variant. While this delta wave may produce slight slowdowns in hiring, we expect job growth to remain very strong overall.”
July’s increase in the Employment Trends Index was driven by positive contributions from seven of eight components. From the largest positive contributor to the smallest, the components were: Industrial Production; Percentage of Firms With Positions Not Able to Fill Right Now; Real Manufacturing and Trade Sales; Ratio of Involuntarily Part-time to All Part-time Workers; Job Openings; Number of Temporary Employees; and Initial Claims for Unemployment Insurance. The one remaining indicator, Percentage of Respondents Who Say They Find “Jobs Hard to Get”, was unchanged from June.
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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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