The Conference Board's Employment Trends Index slipped to 107.01 in May, its first decline in three months, as a sharp drop in small-business hiring plans and a one-off jump in job openings that economists say is unlikely to persist raised questions about the durability of the labor market's recent strength.
The Conference Board's Employment Trends Index fell to 107.01 in May from an upwardly revised 107.88 in April, its first decline in three months, as a sharp drop in small-business hiring plans and a one-off jump in job openings that economists say is unlikely to persist raised questions about the durability of the labor market's recent strength.
"The ETI ticked down slightly in May with five of eight components contributing negatively to the index, highlighting potential downside risks to the labor market," said Jannik Schulz, Economic Research Associate at The Conference Board. "Nonetheless, the index is up 2.1 points compared with six months ago, indicating continued resilience."
The primary drag was the share of small firms reporting that jobs are "not able to be filled right now," which dropped to 29% from 34% in April — the lowest reading since May 2020. While job openings surged above 7.6 million in April, the Conference Board attributed the spike to an idiosyncratic movement in the professional and business services industry that is not expected to carry into coming months. Initial claims for unemployment insurance rose to 214,800 in May from historically low levels in April, though they remain below year-ago readings. Real manufacturing and trade sales and industrial production recorded little change but contributed marginally to the decline.
The May data arrives against a backdrop of steady hiring. Nonfarm payrolls rose by 172,000 in May, extending a streak of monthly gains that has kept the unemployment rate near historic lows. The ETI's dip, however, suggests the pace of job creation could moderate in the second half of the year. Positive signals remain: the share of involuntary part-time workers fell to 17.4% from 17.9%, and the share of consumers reporting that "jobs are hard to get" declined for a second straight month to 18.6% from 19.4%. Temporary-help services employment, often a leading indicator of broader hiring trends, rose for the fifth consecutive month, though its contribution was smaller in May than in prior months.
The divergence between the strong May payrolls number and the forward-looking ETI creates an unusual signal for policymakers. The Federal Reserve, which held its benchmark rate at 5.25% to 5.50% for a seventh consecutive meeting in May, has cited labor market resilience as a key reason to maintain a cautious stance on rate cuts. If the ETI's softening trend is confirmed by weaker payrolls data in the months ahead, it could increase pressure on the Fed to begin easing as early as September. Overnight index swaps currently price roughly 40 basis points of cuts by year-end, implying about a 60% probability of a single quarter-point reduction.
This article is for informational purposes only and does not constitute investment advice.
