Forecast Points Toward Solid U.S. Employment Growth Despite Slowdown

The Conference Board’s Employment Trends Index (ETI) slipped in November following a significant increase in October. It stands at 135.88, down from 136.23 in October. However, the November reading is up 4.7 percent compared to one year ago, and follows the Bureau of Labor Statistics’ (BLS) announcement that employment increased by 228,000 jobs in November in a tightening labor market.

“The decline in the Employment Trends Index in November comes after one of the largest monthly increases ever last month. The ETI is still on an upward trend and suggests that employment is likely to continue to grow in the months ahead,” says Gad Levanon, The Conference Board’s chief economist, North America. “The U.S. economy has been accelerating in recent quarters, leading to strong labor demand that is unlikely to slow down in the coming months.”

Speaking on the BLS announcement, Levanon says, “As the labor market is tightening, employment growth has been gradually slowing in the past couple of years. Is the acceleration in economic activity in recent quarters reversing this trend? The noise created by the hurricanes is making this difficult to answer, but November’s stronger than expected increase may suggest that at the very least, job growth is not slowing further.

“What is clear is that current job growth is more than enough to continue tightening the labor market. The acceleration in economic activity in a time of already tight labor markets is leading to employers’ attempts to squeeze more out of their existing workers. Indeed, labor productivity has been accelerating in recent quarters. Is it sustainable? We had some false starts of productivity acceleration in recent years, but there is more reason for it to be sustained now that the labor market is tight. Employers may also have more scope to raise wages as a result of these productivity gains along with improved profit numbers.”

In calculating its Employment Trends Index, The Conference Board aggregates eight labor-market indicators into a composite index that 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.

It attributes November’s decrease to negative contributions from three of the eight components. From the largest negative contributor to the smallest, these were: Percentage of Firms with Positions Not Able to Fill Right Now, Initial Claims for Unemployment Insurance, and Ratio of Involuntarily Part-time to All Part-time Workers. The other indicators monitored by The Conference Board include the Percentage of Respondents Who Say They Find “Jobs Hard to Get,” the Number of Employees Hired by the Temporary-Help Industry, Job Openings, Industrial Production and Real Manufacturing and Trade Sales.

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