Labor Shortages

Job Growth Expected to Slow Down Over the Coming Months

The Conference Board Employment Trends Index™ (ETI) declined in March to 116.24, down from a downwardly revised 116.75 in February 2023. The Employment Trends Index is a leading composite index for employment. When the index increases, employment is likely to grow as well, and vice versa. Turning points in the index indicate that a turning point in the number of jobs is about to occur in the coming months.

“The ETI declined slightly in February, but remains quite high, with minimal changes over the past year,” said Selcuk Eren, Senior Economist at The Conference Board.  “Job losses are concentrated in specific industries. Overall, the economy continues to add jobs in industries where labor shortages remain, and wage growth remains above its prepandemic rate.  We expect the Federal Reserve will raise interest rates two more times by 25 basis points each in order to bring wage growth and inflation under control. That will trigger job losses and increased unemployment in the second half of 2023 and early part of 2024.”

Eren added: “The labor market remains tight although it has cooled down somewhat from a year ago. On the demand side, the job openings rate is still well above the prepandemic trend but is declining. On the supply side, the labor force continues to grow and reached 166.7 million in March, as a result of rising labor force participation and a rebound in immigration to its long-term trend. The labor-force participation rate for prime-age workers has climbed back to 83.1 percent—the same level as it was in February 2020.  We expect the economy will continue adding jobs in industries where employment has yet to fully recover from the pandemic, such as leisure and hospitality and government. Continued job growth is also likely in health care and social assistance, a reflection of our aging society.

“However, labor demand in other industries is cooling. Job growth in goods-producing industries—including manufacturing and construction—has been slowing and turned negative in March. Employment has also been stagnant in transportation and warehousing, as well as in finance and insurance. The information services industry, where most tech companies are listed, shed jobs compared to its highs in November. In the second quarter of 2023, we expect job gains in industries that are still adding jobs to offset losses in industries that have a negative outlook, resulting in continued slow job growth overall. However, in the second half of 2023, we expect job losses to become more widespread as GDP growth turns negative, with the unemployment rate likely to rise to 4.5 percent by early 2024.”

March’s decrease in the Employment Trends Index was driven by negative contributions from five of eight components: Ratio of Involuntarily Part-time to All Part-time Workers, Number of Employees Hired by the Temporary-Help Industry, Industrial Production, Initial Claims for Unemployment Insurance, and Job Openings.

The Employment Trends Index aggregates eight leading indicators of employment, each of which has proven accurate in its own area. Aggregating individual indicators into a composite index filters out “noise” to show underlying trends more clearly.

The Conference Board Employment Trends Index ™, January 2000 to Present

The eight leading indicators of employment aggregated into the Employment Trends Index include:

• 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 Research Foundation)
• Number of Employees Hired by the Temporary-Help Industry (U.S. Bureau of Labor Statistics)
• Ratio of Involuntarily Part-time to All Part-time Workers (BLS)
• Job Openings (BLS)*
• Industrial Production (Federal Reserve Board)*
• Real Manufacturing and Trade Sales (U.S. Bureau of Economic Analysis)**

*Statistical imputation for the recent month

**Statistical imputation for two most recent months

The Conference Board publishes the Employment Trends Index monthly, at 10 a.m. ET, on the Monday that follows each Friday release of the Bureau of Labor Statistics Employment Situation report. The technical notes to this series are available on The Conference Board website: http://www.conference-board.org/data/eti.cfm.

The Conference Board is the member-driven think tank that delivers trusted insights for what’s ahead. Founded in 1916, we are a non-partisan, not-for-profit entity holding 501 (c) (3) tax-exempt status in the United States. www.conference-board.org.

The Conference Board Employment Trends Index™ and turning points, November 1973 to Present