Assessing the Change in Labor Market Conditions

Average Monthly Change in LMCI since 2007


The U.S. labor market is large and multifaceted. Often-cited indicators, such as the unemployment rate or payroll employment, measure a particular dimension of labor market activity, and it is not uncommon for different indicators to send conflicting signals about labor market conditions. Accordingly, analysts typically look at many indicators when attempting to gauge labor market improvement. However, it is often difficult to know how to weigh signals from various indicators. Statistical models can be useful to such efforts because they provide a way to summarize information from several indicators. This Note describes a dynamic factor model of labor market indicators that we have developed recently, which we call the labor market conditions index (LMCI).

FEDS Notes. Washington: Board of Governors of the Federal Reserve System, May 22, 2014.
Christopher J. Nekarda
Christopher J. Nekarda
Principal Economist

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