The Conference Board Employment Trends Index rose 0.7% [pdf] in March 2010, from a revised score of 93.7 to 94.4. This marks the seventh straight month the Employment Trends Index (ETI) has risen, signifying what the Conference Board says is likely lasting job growth.
More significant than the ETI’s modest monthly gain is the 5.5% annual growth rate it has undergone since March 2009. During the past three months, all of the index’s eight components have been improving.
Prior to this most recent growth spurt, the ETI declined every month between January 2008 and April 2009. It then remained essentially flat from May – August 2009 after 20 straight months of decline. A score of 100 equals the Employment Trends Index’s level in 1996.
Employment Trends Index Outperforms Unemployment Rate
In March 2010, the unemployment rate stayed flat at 9.7% for the third consecutive month, signifying labor stagnation as opposed to the ETI’s indication of modest monthly improvement. However, the economy did add 162,000 non-farm payroll jobs during the month.
Looking beyond these numbers, many more Americans are unable to find work than those counted in the official unemployment figure. The civilian labor force participation rate, which is the proportion of the non-institutionalized civilian population age 16 and older serving in the labor force, marginally rose from 64.8% to 64.9%. This figure stood at 66% in December 2007. The employment-population ratio, which measures the ratio of employed persons to the total non-institutionalized civilian population age 16 and older, also slightly improved from 58.5% to 58.6%. It stood at 62.7% in December 2007.
Employment Aids ETI Performance
This month’s increase in the Employment Trends Index was driven by positive contributions from five out of the eight components. The improving indicators were: Percentage of Respondents Who Say They Find “Jobs Hard to Get,” Initial Claims for Unemployment Insurance, Number of Temporary Employees, Industrial Production and Real Manufacturing and Trade Sales.
ETI results suggest the 162,000 non-farm payroll jobs added by the U.S. economy in March 2010 were not a fluke, said Gad Levanon, Associate Director, Macroeconomic Research at The Conference Board. “However, we do not expect job growth to significantly accelerate in the short term, as both consumption and investment growth are likely to remain relatively weak.”
Job Stability May Lead to Spending
In an example of how an improving employment situation can benefit retailers, seven in 10 Americans consider their job situation today “just as stable” or “more stable” than last year, according to the March 2010 American Express Spending & Saving Tracker. The Tracker also indicates this feeling of job stability often leads to higher spending. Sixty percent of respondents reporting they have more job stability have increased their spending and investments. Popular areas for increased spending include discretionary categories such as dining out (35%) and travel (31%).
Employment Trends Index Aggregated Indicators
The Employment Trends Index consists of eight aggregated labor market indicators:
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.
