Job Growth Slows As Labor Market Tightens

The Conference Board’s Employment Trends Index reversed course in February from the previous month’s decline, posting a climb to 111.15—up from 109.34 in January. The increase marks a 4.3 percent gain in the index over the past 12 months.

The February index report follows the U.S. Bureau of Labor Statistics Employment Situation Report showing that the country had only gained 20,000 jobs that month. Gad Levanon, chief economist, North America, for The Conference Board, says, “The biggest surprise in February’s jobs report was the meager gain in jobs, just 20,000. But this number reflects a bounce back from the huge job gain of 311,000 in January. The average of the two months, 165,500, better reflects the current trend in employment growth. At this point, our forecast is still for a gradual slowdown in job growth during 2019.”

Levanon adds, “The Employment Trends Index bounced back in February. Last month’s reading had been negatively influenced by the partial government shutdown. In recent months, the index is no longer on an upward trend, suggesting that job growth will slow down in 2019.”

In determining its Employment Trends Index, the Conference Board aggregates eight labor market indicators that it has found are accurate within their own areas. It notes that aggregated individual indicators into a composite index filters out “noise” to show underlying trends more clearly.

“Another important message from [U.S. Bureau of Labor Statistics Employment Situation Report] is the continuing tightening of the labor market,” says Levanon. “U6, the broader measure of labor market slack, is now at 7.3 percent, the lowest rate since January 2001, and down 0.9 percentage points in the last 12 months. Most importantly, wage growth continues to accelerate. In the last 12 months, average hourly earnings grew by 3.4 percent, versus 2.6 percent in the previous 12 months.

“The meager job gain of 20,000 in February was an aberration. We still expect employment to grow fast enough for the labor market to tighten further in 2019, making it easier for job seekers to find a job. One of the ETI components, the percent of respondents who say they find ‘Jobs Hard to Get’ from The Conference Board Consumer Confidence Survey, is now at the lowest rate since 2000.”

February’s increase was fueled by positive contributions from seven of the eight components. From the largest positive contributor to the smallest, these were: the Ratio of Involuntarily Part-time to All Part-time Workers, Percentage of Respondents Who Say They Find “Jobs Hard to Get,” Real Manufacturing and Trade Sales, the Percentage of Firms With Positions Not Able to Fill Right Now, Job Openings, Industrial Production and the Number of Employees Hired by the Temporary-Help Industry. The indicator not factoring into this month’s decrease was initial claims for unemployment insurance as reported by the Department of Labor.

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