Written by Steven Hansen
The Conference Board’s Employment Trends Index – which forecasts employment for the next 6 months – declined in October 2013. However, the government shutdown played a part in this decline.
The Conference Board believes future employment growth will likely moderate due to a weaker than expected domestic demand – while Econintersect‘s own employment index is saying that economic pressures should weaken in the coming month but the trend will reverse early next year.
From the Conference Board:
The Conference Board Employment Trends Index™ (ETI) decreased in October. The index now stands at 113.65, down from 114.68 (a downward revision) in September. The ETI figure for October is 4.9 percent higher than a year ago.
“Like many other economic indicators, the October decline of the Employment Trends Index was partially due to the government shutdown,” said Gad Levanon, Director of Macroeconomic Research at The Conference Board. “The latest job numbers do in fact show some strengthening in the employment trend. But as domestic demand was weaker than expected in the third quarter, we might see some moderation in employment growth in the coming months.”
October’s decline in the ETI was driven by negative contributions from four of its eight components. The decreasing indicators — from the largest negative contributor to the smallest — were Initial Claims for Unemployment Insurance, Consumer Confidence Survey® Percentage of Respondents Who Say They Find “Jobs Hard to Get,” Ratio of Involuntarily Part-time to All Part-time Workers, and Job Openings.
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.
Comparing BLS Non-Farm Employment YoY Improvement (blue line, left axis) with Econintersect Employment Index (red line, left axis) and The Conference Board ETI (yellow line, right axis)
The graph above offsets the Conference Board ETI by 6 months. Econintersect sees employment weakening over the coming months but the trend will reverse as we enter the new year.
Caveats on the Employment Trends Index
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)
Unfortunately many of these indices are not accurate in real time being subject to at times significant backward revision.
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