The labor market continues to grow more competitive, and the U.S. Bureau of Labor Statistics has reported that unemployment dropped to 3.9 percent last month. As a reflection of that, the Conference Board’s Employment Trends Index continued its upward climb in April. The index now stands at 108.8, up from 107.37 in March. It represents a 4.9 percent increase compared to a year ago.

“In recent months, the Employment Trends Index continued to improve, signaling that employment growth will remain solid through the summer,” says Gad Levanon, chief economist, North America, at The Conference Board. “With the economy growing well above trend, and the working-age population barely growing at all, we expect the labor market to significantly tighten in the coming year. At 3.9 percent, the unemployment rate is historically low, and we expect it to be around 3.5 percent a year from now.”

Speaking on the government’s report on the April unemployment rate, Levanon adds, “The tightening labor market is a result of a simple reality: when the working age population is barely growing, even moderate job growth is enough to significantly tighten the labor market. Based on present data, there is no reason to believe that this trend will stop anytime soon, meaning a much tighter labor market a year from now.

“Despite the tightening labor market, the average hourly earnings measure is not accelerating much, though the more reliable Employment Cost Index [the Bureau’s quarterly report detailing the changes in the costs of labor for businesses], released last week, has been accelerating more visibly, especially among blue collar workers.”

In calculating its Employment Trends Index, The Conference Board aggregates eight labor-market indicators that it considers accurate in their own areas. Aggregating indicators into a composite index filters out “noise,” more clearly revealing trends within the data. The indicators come from the U.S. Department of Labor, the U.S. Bureau of Labor Statistics, the Federal Reserve Board and other sources.

Seven of the eight components contributed to the Index’s April increase. From the largest positive contributor to the smallest, these were: Industrial Production, Initial Claims for Unemployment Insurance, Percentage of Respondents Who Say They Find “Jobs Hard to Get,” Job Openings, Real Manufacturing and Trade Sales, Number of Employees Hired by the Temporary-Help Industry, and Ratio of Involuntarily Part-time to All Part-time Workers. The Percentage of Firms With Positions Not Able to Fill Right Now made a neutral contribution.