Fed Labor Market Conditions Index Contracts For 5th Straight Month

Despite a small rise MoM, The Fed's own Labor Market Conditions Index has now deteriorated year-over-year for 5 straight months, despite significant upward revisions over the last 6 months, most notably in September and October.

It seems a Trump win managed to improve the last six months of data...

 

While the index itself is at 8-month highs, this is still the 5th straight month of contraction year-over-year in LMCI...

 

As we noted previously, that's only the eighth time in nearly 40 years the index was down on a year-over-year basis, Deutsche Bank Chief U.S. Economist Joseph LaVorgna wrote in a note to clients today. Of the seven previous occasions, LaVorgna wrote, "four were soon followed by recession."

(In the three other cases, two were false alarms, in 1986-87 and 1995-96, and in 1981 the recession began shortly before the annual change in the LMCI turned negative.)

 

LaVorgna said the weakness in the LMCI indicates a rising possibility of recession.

 

"The upshot is that the economic outlook remains fragile despite the ostensible robustness of the labor market," he wrote.

But then again, everything is different and dreamy in the post-Trump world.