Tags: Fed | Job | Market | Activity

New Fed Gauge Finds Job-Market Activity Highest Since 2008

Wednesday, 08 October 2014 07:16 PM

A Federal Reserve measure of labor market activity across the country rose to a six-year high last month, according to data released Wednesday.

Activity increased to minus 0.53 in September from minus 0.57 the prior month, the Federal Reserve Bank of Kansas City said. A separate measure of momentum declined to 1.12 from 1.26, still near the record 1.32 level recorded in May. The two measures together make up the Kansas City Fed Labor Market Conditions Indicators, which are calculated from 24 data points.

“Both concur in indicating that the level of activity has improved,” Jon Willis, a Kansas City Fed economist who created the gauges, said in a phone interview. “What gives me confidence that we’re going to keep seeing improvement is the momentum, which tells you how hot the engine is. That momentum has been revving at a very high pace in the past six months.”

With the unemployment rate falling faster than policy makers had forecast this year, Fed Chair Janet Yellen and other officials have said the drop overstates progress toward full employment and that a broader array of gauges is needed to give a fuller picture of employment. The Labor Department said the jobless rate fell to a six-year low of 5.9 percent in September.

The Federal Reserve Board in Washington also has developed a composite labor-market conditions index that tracks 19 variables and places greater weight on indicators that are in broad agreement.

The Fed Board said on Oct. 6 that the gauge rose by 2.5 points last month after gaining 2.0 points in August. The index is heavily weighted to the unemployment rate and private payrolls.

Willis created the Kansas City indicators with his colleague Craig Hakkio, an economist and 30-year veteran of the regional bank. The first indicators came out during August.

Yellen mentioned the Board’s index, as well as the Kansas City indicators, in an Aug. 22 speech to the central bank’s annual monetary policy symposium in Jackson Hole, Wyoming. She has cited persistent labor-market slack as justification for the Fed’s pledge to keep rates near zero for a “considerable time” after it completes a bond-purchase program that’s set to end this month.

“This broadly based metric supports the conclusion that the labor market has improved significantly over the past year, but it also suggests that the decline in the unemployment rate over this period somewhat overstates the improvement in overall labor market conditions,” she said.

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A Federal Reserve measure of labor market activity across the country rose to a six-year high last month, according to data released Wednesday.
Fed, Job, Market, Activity
Wednesday, 08 October 2014 07:16 PM
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