Despite Modest March Job Growth, Labor Market Continues To Tighten

The U.S. labor market continued to tighten in March. The economy added 103,000 jobs last month, and the Conference Board reports that its Employment Trends Index (ETI) ticked up to 107.72, from 107.31 in February. The March change represents a 5.5 percent increase in the index compared to the same month last year.

“The ETI continued its upward trend in March, suggesting that job growth will remain robust in the coming months,” said Gad Levanon, chief economist, North America, at The Conference Board. “We interpret Friday’s disappointing job numbers as noise in an otherwise fast-growing labor market.”

March’s 103,000-jobs increase trailed the 326,000 jobs added in February. Brian Schaitkin, senior economist at The Conference Board, says, “Labor markets remain tight as average job creation on both a three- and 12-month average basis remains very fast for the late stage of the current economic expansion. This fast employment growth is creating even tighter labor markets as overall participation rates have remained flat because more workers are aging out of prime working years.”

Nearly all areas, except for the retail and information sectors, showed rising employment trends in March. While job growth in March was softer than in February, strong consumer demand continued to support manufacturing job growth. Schaitkin adds, “In the coming months, US trade policy uncertainty may make some firms reluctant to hire, fearing supply chain disruptions, while others may hire more domestic workers as a hedge against such disruptions.”

In calculating its Employment Trends Index, The Conference Board aggregates eight labor-market indicators that it considers accurate in their own areas. Aggregating indicators into a composite index filters out “noise,” more clearly revealing trends within the data. The indicators come from the U.S. Department of Labor, the U.S. Bureau of Labor Statistics, the Federal Reserve Board and other sources.

March’s increase drew from positive moves by five of the eight indicators. From the largest positive contributor to the smallest, these were: ratio of involuntarily part-time to all part-time workers, industrial production, percentage of firms with positions not able to fill right now, percentage of respondents who say they find “jobs hard to get,” and real manufacturing and trade sales. Other indicators included in the aggregate include initial claims for unemployment insurance, the number of employees hired by the temporary-help industry and job openings.

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