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Assessing the Change in Labor Market Conditions

Hess Chung (), Bruce Fallick (), Christopher Nekarda () and David Ratner ()
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Hess Chung: Federal Reserve Board of Governors
David Ratner: Federal Reserve Board of Governors

No 1438, Working Papers (Old Series) from Federal Reserve Bank of Cleveland

Abstract: This paper describes a dynamic factor model of 19 U.S. labor market indicators, covering the broad categories of unemployment and underemployment, employment, workweeks, wages, vacancies, hiring, layoffs, quits, and surveys of consumers’ and businesses’ perceptions. The resulting labor market conditions index (LMCI) is a useful tool for gauging the change in labor market conditions. In addition, the model provides a way to organize discussions of the signal value of different labor market indicators in situations when they might be sending diverse signals. The model takes the greatest signal from private payroll employment and the unemployment rate. Other infl uential indicators include the insured unemployment rate, consumers’ perceptions of job availability, and help-wanted advertising. Through the lens of the LMCI, labor market conditions have improved at a moderate pace over the past several years, albeit with some notable variation along the way. In addition, from the perspective of the model, the unemployment rate declined a bit faster over the past two years than was consistent with the other indicators.

Keywords: LMCI; U.S.labor market; dynamic factor model; unemployment rate; employment (search for similar items in EconPapers)
JEL-codes: E24 E66 J20 J6 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-lab, nep-lma and nep-mac
Date: 2015-01-06
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Working Paper: Assessing the Change in Labor Market Conditions (2014) Downloads
Working Paper: Assessing the Change in Labor Market Conditions (2014) Downloads
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