Justin Fox, Columnist

This Job Market Slump Started a While Ago

A little-known, but broader, measure shows employment has been on the downswing since the beginning of the year.

June 6, 2016 at 7:52 PM UTC

Corrected

June 6, 2016 at 8:13 PM UTC

Justin Fox is a Bloomberg Opinion columnist covering business, economics and other topics involving charts. A former editorial director of the Harvard Business Review, he is author of “The Myth of the Rational Market.”

Unemployment line.
Photographer: Mark Ralston/AFP/Getty Images

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The sharp May hiring slowdown revealed in Friday’s employment report took a lot of people -- including me -- by surprise. It shouldn’t have. Things have actually been on the downswing for the U.S. labor market for months, according to the Federal Reserve’s Labor Market Conditions Index.

The LMCI is a new measure cooked up by Federal Reserve Board economists in 2014 that consolidates 19 different labor market indicators to reflect changes in the job market. They calculated it going all the way back to 1976; the chart above shows its movements since the end of the last recession in June 2009. The May index, released Monday morning, showed a 4.8-point decline from April. As you can see from the chart, the index has now declined for five straight months -- its worst performance since the recession.

The index does get revised a lot. When the January number was first reported on Feb. 8, for example, it was still modestly positive. Still, since the February number was released on March 7 the news from the LMCI has been unremittingly negative. Which probably should have told us something.