Yesterday, for the first time, the Fed published its summary index of the change in labour market conditions, the Labor Market Conditions Index (LMCI). There are a few interesting observations to note with regard to the index.
First, the readings for August and September were quite weak. The change in LMCI was 2.5 index points, up from 2.0 in August. These are the lowest levels since 2012 and thus point to a slower degree of tightening of the labour market. This is somewhat at odds with the recent job report and the impression from other indices we have found useful to look at such as ISM employment indices and jobless claims.
Second, comparing the change in LMCI with the monthly change in private payrolls suggests that the LMCI actually tends to lead the change in private payrolls. In isolation, it points to some softening of private payrolls looking ahead.
However, there are a few caveats:
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