The Conference Board’s Employment Trends Index released today rose in January to a reading of 118.74, an increase from the upwardly revised reading of 117.06 in December and signaling a shift from the short-lived declining trend seen last year.
“The Employment Trends Index rose for the second consecutive month in January, a reversal of a short-lived declining trend in 2022,” said Selcuk Eren, senior economist at The Conference Board. “Despite rapid interest rate hikes — which were expected to reduce labor demand — we haven’t seen widespread layoffs. Indeed, hiring was outsized and broadly based in the January employment report. Robust hiring continues to keep the ETI at a very high level and the economy is still experiencing significant job gains in industries where labor shortages have been most acute.”
Eren noted labor shortages will continue to be the theme going forward.
“We have seen job gains in industries — including leisure and hospitality and government — where employment is still below pre-pandemic levels. Likewise, job openings and voluntary quits are below their historic highs but still above pre-pandemic levels. The number of employees working in temporary help services — a component of the ETI and an important leading indicator for hiring — increased in January after falling for two consecutive months. This is revised from an originally reported five-month decline.”
Thus far, job losses seem to be limited to the information sector, which includes most tech companies, according to Eren. One sign of rebalancing in the labor market may be slower wage growth. Hourly wage growth — which stands at 4.4% year-over-year in January — remains above pre-pandemic levels but is on a declining trend after reaching 5.9% last year.
The Conference Board anticipates the Federal Reserve to continue increasing interest rates to reduce labor market tightness and bring wage growth and inflation under control for the rest of 2023.
The organization also noted January’s release of the Employment Trends Index includes historical revisions dating back to 2017, causing index levels and month-on-month changes to be incomparable to previous releases. However, the cyclical properties (e.g., turning points and trends) of the index remain unchanged.