More Weakness Seen in Payrolls and Employment Trends

Jon C. Ogg

It was just on Friday that the U.S. Department of Labor signaled weak payroll creations in the month of August. Its report was even weaker in the private sector payrolls gains than ADP had indicated ahead of time. Now we have a third piece of confirming news from the Conference Board’s Employment Trends Index for August.

The Employment Trends Index decreased in August to 128.02, down from 128.44 in July. What stands out about this drop is that the index had actually been increasing in the prior two months. The Conference Board showed that this change represents a 0.8% gain in the index compared to a year ago.

What economists and investors need to understand here is that the Employment Trends Index is made up of an aggregation of eight labor-market indicators. The aggregation aims to filter and smooth out noise of any single indicator and aims to show underlying trends more clearly.

August’s decrease was almost unilateral. It was shown to be fueled by negative contributions from seven of the eight index components, which is far from a balanced reading.

The index weakness is shown here in order of the largest negative contributor to the smallest negative contributor:

  • Percentage of Respondents Who Say They Find “Jobs Hard to Get”
  • Ratio of Involuntarily Part-time to All Part-time Workers
  • Job Openings
  • Initial Claims for Unemployment Insurance
  • Industrial Production
  • Real Manufacturing
  • Trade Sales
  • Number of Employees Hired by the Temporary-Help Industry

The Conference Board said of August’s Employment Trends index:

The Employment Trends Index is consistent with moderating job growth in the second half of 2016. With the ongoing massive retirement of baby boomers, even moderate job growth is enough to continue to tighten the US labor market.