March’s Sizable Job Growth Numbers May Mask Impending Slowdown

There may be a slowdown on the horizon for the pace of employment growth in the U.S. The Conference Board’s Employment Trends Index slipped in March, following an increase in February. Although it represents a 3.1 percent gain over the year-ago level, the index ended the month at 110.98, down from 111.62 in February. And while the economy added 196,000 jobs in March, a significant turn-around from February’s poor numbers, the data from the U.S. Bureau of Labor Statistics indicated some warning signs.

“After growing rapidly through most of 2017 and 2018, the Employment Trends Index has been fluctuating around a flat trend in recent months, suggesting that employment growth will continue, but at a slower rate through the summer,” says Gad Levanon, chief economist, North America, at The Conference Board. “Particularly concerning was the decline in the number of workers employed by the temporary-help industry, an important leading indicator and component of the ETI, which declined by one percent in the past three months. The main trends in the U.S. labor market—including growing employment and labor force participation, tightening labor markets and accelerating wages—are likely to continue in 2019, but more modestly.”

Along with the decline in the temporary help industry, Levanon noted, “Manufacturing employment is down versus two months ago, the first time that has happened since the 2015-16 manufacturing recession. In addition, average weekly hours in manufacturing is clearly on a negative trend, raising additional concerns about another manufacturing recession.

“Overall, the U.S. economy is still adding jobs at a solid pace, but job growth is likely to slow down in the coming months. Given the stagnation in the working-age population, even this more modest job growth is still likely to continue to tighten the labor market beyond the very low 3.8 percent unemployment rate.”

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 are placed into a composite index to filter out “noise” and show underlying trends more clearly. March’s decrease was fueled by negative contributions from three of the eight components. From the largest negative contributor to the smallest, these were: Percentage of Respondents Who Say They Find “Jobs Hard to Get,” Ratio of Involuntarily Part-time to All Part-time Workers and the Number of Employees Hired by the Temporary-Help Industry.

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