Monday, December 15, 2014

Fed’s LMCI Dips to 2.9%

The Federal Reserve’s Labor Market Conditions Index (LMCI) was 2.9 in November, following a reading of 3.9 in October and 4.5 in September. The LMCI generally declines during recessions and typically rises during expansions.

The LMCI is a Federal Reserve staff research product developed to summarize overall labor market conditions. It is the primary source of common variation among 19 labor market indicators, placing greater weight on indicators whose movements are highly correlated with each other—like the unemployment rate and payroll employment—and primarily reflects those indicators that are in broad agreement.

The included indicators cover categories such as unemployment, underemployment, employment, workweeks, wages, vacancies, hiring, layoffs, quits and surveys of consumers and businesses. All indicators are measured at a monthly frequency and are seasonally adjusted.

A few indicators account for the bulk of the improvement in the LMCI since the end of the recession, as is typical in a recovery. In the first two years of the recovery, the insured unemployment rate made a large contribution to the improvement in the LMCI, reflecting a substantial slowing in layoffs; this contribution has since diminished. Gains in private payroll employment and declines in the unemployment rate have been consistent contributors to the improvement, although more in some years than in others. So far in 2014, private employment and the unemployment rate have been the primary sources of improvement in the LMCI.

The Federal Reserve plans to release the updated LMCI after 10:00 a.m. on the first business day following the Bureau of Labor Statistics’ monthly Employment Situation report.

Read the LMCI FEDS Note.
Download the data set.

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