Fed’s Labor Market Conditions Index StrengthensChristopher Condon
A Federal Reserve index showed that the U.S. labor market improved in September.
The Labor Market Conditions Index, derived from 19 indicators, rose by 2.5 points last month after gaining 2.0 points in August, according to data released today by the Fed.
“We view today’s update of the LMCI as consistent with broad-based labor market improvement,” Jesse Hurwitz, an economist with Barclays Capital Inc in New York, wrote in a client note.
Some analysts cast doubt on the usefulness of the index as a gauge of labor-market health.
“Separately the variables have value, but pushed together as a Group of 19, there is nothing here to sink your teeth into,” Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, wrote in a note to clients.
“We don’t think this series can replace the unemployment rate as the single most useful indicator for communicating the goals and strategy of Fed policy,” Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York, said in a note to clients.
Fed Chair Janet Yellen, who cited the index in an Aug. 22 speech to the Fed’s annual symposium in Jackson Hole, Wyoming, has broadened her assessment of the labor market to better measure how much slack remains as unemployment declines. She has cited persistent slack as justification for the Fed’s pledge to keep interest rates near zero for a “considerable time” after it completes a bond-purchase program that’s set to end this month.
The index is heavily weighted to the unemployment rate and private payrolls. It also includes the labor-force participation rate as well as data on wages, hiring and dismissals. Starting today, the monthly change in the index is being released on the first business day after the Labor Department issues its jobs report.
The U.S. jobless rate fell to 5.9 percent in September from 6.1 percent the month before, Labor Department data showed last week.
(An earlier version of this story was corrected to say the index rose by 2.5 points.)