Revised Positive #s Are Still Just Positive #s


From Alhambra Investment Partners, by Jeffrey P. Snider

The Federal Reserve’s Labor Market Conditions Index (LMCI) wasn’t put together until the May 2014, but it was back-tested extensively to ensure that its various assumptions fit with observed conditions in the US economy – no matter what those conditions might have been or be in the future. Even still, given its nature as an amalgamation of 19 separate labor market data points it can be noisy and easily misconstrued.

In 2006, for example, the LMCI picks up on the uncertain and dampening end of the housing bubble. It started out that year as everything else very strongly at +14.4, but turned slightly negative just four months later. The metric then suggested a labor market rebound heading into 2007, which had it existed at the time would no doubt have fit with the whole “subprime is contained” early crisis narrative. The…

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