Employment Trends Index Plummets in Feb.
Following on the heels of disappointing US unemployment figures for February 2009, the Conference Board ETI (Employment Trends Index) fell sharply to 91.0, decreasing 3.2% from the January revised figure of 94.0, and down 21.7% from February 2008. Since February 2008, the ETI has declined faster than at any other time in its 35-year history.
Recent news on consumer employment, confidence and spending statistics have been mixed, with unemployment up and confidence down while spending has recently trended upward. The US unemployment rate hit 8.1% in February 2009. Also in February 2009, the Conference Board Consumer Confidence Index reached an all-time low of 25.0. However, in January 2009, the Department of Commerce reported that consumer spending increased $56.4 billion, or 0.6%, while disposable personal income increased $183 billion, or 1.7%. Personal saving as a percentage of disposable personal income also increased to 5% in January, compared with 3.9% in December.
Despite the recent Department of Commerce report on consumer spending, Gad Levanon, senior economist at the Conference Board, said ETI results suggest spending is not due for a rebound in the near term. “As job losses persist, the drop in overall earnings makes a rebound in consumer spending unlikely for the next few months,” said Levanon. “The decline in employment will only moderate once companies anticipate some revival in domestic and global economic activity.”
The index is down in all eight aggregated labor market indicators:
- Percentage of respondents who say they find “Jobs Hard to Get” (The Conference Board Consumer Confidence Survey)
- Initial claims for unemployment insurance (U.S. Department of Labor)
- Percentage of firms with positions not able to fill right now (National Federation of Independent Business)
- Number of employees hired by the temporary-help industry (U.S. Bureau of Labor Statistics)
- Part-time workers for economic reasons (BLS)
- Job openings (BLS)
- Industrial production (Federal Reserve Board)
- Real manufacturing and trade sales (U.S. Bureau of Economic Analysis)
The aggregation of these eight components into the Employment Trends Index (ETI) is constructed so that all components are equally weighted and volatility adjusted so that no single component can dominate the index. The volatility adjustment is done by calculating standardization factors determined by the standard deviation of the monthly percent change in each component. The period used for calculating the standardization factors begins in 1973 and ends at 2007. The standardization factors are then used to construct the index from 1973 to 2008. According to the Conference Board, the ETI typically leads unemployment figures by two months.
The next monthly ETI report is scheduled for release Monday, April 6, 2009.