Another sign of improving labor market

INDICATOR: March Conference Board Employment Trends Index

KEY DATA: Index: up 0.5 point; Year-over-Year: Up 5.1%

IN A NUTSHELL: "Another labor market indicator, another indication the labor market is improving."

WHAT IT MEANS: We don't know what group of indicators the Fed Chair uses to determine the state of the labor market so here is another one to put in your pile of potential numbers: The Conference Board's Employment Trends Index. The index jumped in February and continued its rise in March. Four of the eight components of the index were up. While it would be nice if all the categories posted gains, it was still good that improvement was seen in unemployment claims, industrial production, temporary workers and manufacturing and trade sales. This index does a nice job of tracking total payrolls though it is a lot less volatile. The pretty consistent increase in the measure for the last eighteen months parallel's the improvement in payrolls and also the decline in the unemployment rate.

MARKETS AND FED POLICY IMPLICATIONS: The Conference Board's data have been generally pointing to an improving economy. The real key is the whether it is enough to cause labor market conditions to tighten. The rise in the Employment Trends Index is another in a growing stable of measures that seem to say, yes, the jobs market is getting better and we should see even faster payroll gains, a decline in the unemployment rate and ultimately a rise in worker compensation. The Conference Board is expecting "solid growth in the coming months" and I think they will be more than "solid". It would be nice if Chair Yellen would point to some indicators that she trusts but when it comes to communications, Fed Chairs normally are not that great at it. It may take a while for Yellen to determine how much to say. In the interim, those of us who have to discuss the economy will fill the void and my contribution is that conditions are even better than the March employment report seemed to signal. Indeed, I have suggested that we are in for a really big number very soon and this report adds to my belief. How the markets will react to this number is a good question. It is not a major release but investors really should start watching it more closely, as they should all the other so-called second-tier labor market indicators.

Joel L. Naroff is the co-author, with veteran journalist Ron Scherer, of "Big Picture Economics: How to Navigate the New Global Economy". Release date is April 21, 2014