The labor market should remain tight in 2020, despite the pace of job growth easing off. And while The Conference Board’s Employment Trends Index declined in December—now standing at 109.68, down from 110.51 in November and marking a 1.2 percent decline in the index over the past 12 months—its behavior is in line with expectations, given the labor market’s expansion.

“The Employment Trends Index decreased in December and continues to be on a flat trend since the summer of 2018,” says Gad Levanon, head of The Conference Board Labor Markets Institute. “In the current state of the labor market, a flat index is consistent with an ongoing labor market expansion. We expect job growth to remain solid and the labor market to continue tightening. In Friday’s job report, the broadest measure of labor market slack, known as the U6 rate, fell to 6.7 percent, the lowest level on record. Such a tight labor market is a growing obstacle for further economic growth, but not a big enough obstacle to derail the U.S. economy from its two-percent growth trajectory.”

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. December’s decrease in The Conference Board’s Employment Trends Index was fueled by negative contributions from five of the eight components.

On Friday, the federal government reported that the U.S. economy added 145,000 jobs in December and the unemployment rate remained at 3.5 percent. Job creation concentrated primarily in the services and construction sectors, while the decline of 12,000 jobs in manufacturing shows that this part of the economy is still weak. The Conference Board notes that easing trade tensions between China and the U.S. may help to further improve business confidence in 2020.

In 2019, the unemployment rate reached its lowest point since the late 1960s, and job growth was strong with an average of 176,000 jobs added per month, although just over 20-percent slower than the average of 223,000 in 2018. In its analysis, The Conference Board highlights that the labor market performance in 2019 should therefore be considered a significant achievement after an economic expansion of over 10 years.

While The Conference Board expects employment growth to somewhat moderate in 2020, the labor market will likely continue to tighten further as the working-age population is barely growing and labor force participation rates are only slowly increasing. It says that employers hiring blue-collar and manual services workers will have a harder time recruiting and retaining current employees. For these workers it also sees strong wage acceleration, much faster than growth in the average hourly earnings, which stagnated in 2019 at around 3.2 percent and weakened in December to 2.9 percent. Slower wage growth for highly educated management and professional workers has held back average wage growth for all workers.