The Fed Labor Market Conditions Index (LMCI) is a composite indicator derived from 19 different labor market statistics. It is designed to provide a more comprehensive view of the U.S. employment landscape than any single metric like the unemployment rate. The index helps policymakers and investors understand the momentum and underlying health of the labor market by aggregating data on hiring, vacancies, and wage growth.
The index is calculated using a dynamic factor model that extracts a common trend from 19 labor market indicators, including payrolls, the unemployment rate, and the quit rate. A positive value indicates improving conditions, while a negative value suggests deterioration.
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