The U.S. labor market declined in May to the weakest in three-and-a-half years and is likely to deteriorate further, the Conference Board said Monday as it launched a new leading indicator for employment.
The Conference Board said its Employment Trends Index (ETI) fell in May to 113.7 from 114.3 in April, for the lowest since December 2004. The index is down 6 percent since July 2007, it said. The index's all-time peak was 126.5 in July 2000.
The Conference Board said the Employment Trends Index peaked in this cycle in summer 2007, foreshadowing job losses that began in January, and saw no signs of a turnaround yet.
"We forecast further softening in the labor market, a moderate rise in unemployment, and weaker wage growth over the next several quarters," said Gad Levanon, senior economist at the Conference Board, a private research group.
"Employers will find it easier to recruit and hire, and will be looking at slower growth in compensation costs. Workers will find it harder to get a job, a raise or a bonus — all of which will further rein in consumer spending."
However, the Conference Board said it did not anticipate job losses on the scale of those seen in previous downturns because employers have kept their payrolls leaner.
The Conference Board will publish the Employment Trends Index monthly on the Monday that follows the release of the U.S. Bureau of Labor Statistics monthly jobs report.
Friday's jobs report showed the U.S. unemployment rate surged to 5.5 percent in May, its highest in more than 3-1/2 years, as the sluggish economy lost jobs for the fifth straight month.
The jump in the monthly jobless rate was the biggest in 22 years and renewed fears the U.S. economy was at growing risk of sliding into recession.
The Conference Board says its index is based on eight components. As a forward-looking indicator it says the ETI leads employment trends by six to nine months before peaks and up to three months before troughs.
The ETI components include the percentage of those who say jobs are "hard to get" in the Conference Board's monthly consumer confidence survey, the Labor Department's data on initial claims for unemployment insurance and the National Federation of Independent Business's reading on firms with jobs open.
Government and Federal Reserve data on industrial production, manufacturing, job openings and part-time employment are also used.