US: Labor Market Conditions Index

February 6, 2017 09:00 CST

Actual Previous Revised
Level 1.3 -0.3 0.6

The labor market conditions index hasn't been building up much momentum but it is positive, at 1.3 in January for the eighth straight plus score (December revised to plus 0.6 from an initial minus 0.3). Still, the readings for this indicator, a wide composite of 19 separate indicators, have been soft and point to still ample slack in the labor market and perhaps no increasing risk of wage inflation.

The Labor Market Conditions Index is an experimental indicator compiled by the Federal Reserve to track labor market activity. It is a broad composite with 19 components.

The Fed has a dual mandate from Congress †healthy job growth and low and stable inflation. This index goes beyond just looking at the unemployment rate and payroll jobs gains. It provides a very broad view of the labor market that the Fed watches for one of the two mandates. This index at times can affect Fed policy.

The labor market conditions index summarizes a wide range of labor market indicators. The Fed not only created this index but also watches it for interpreting the health of the labor market.

The labor market conditions index is by definition an index. Higher index numbers are positives and vice versa. The report focuses on the change in the index †how strong a plus change or a negative change. Plus indicates improving labor market conditions. But there is extreme detail with 19 components. Subcomponent detail can be important, depending on how many components are positive versus those that are negative or sluggish. A key feature of this report is that it pulls together many labor market indicators into one place.