Notes: All series have a mean of zero over the period January 1992 through January 2024. The y-axis unit is standard deviations of the aggregate LMCI series. The dashed vertical line denotes the start of monetary policy tightening in March 2022. Information on series construction and sources for model input data can be found in the data appendix of Dilts Stedman and Pollard (2023).
Sources: Dilts Stedman and Pollard (2023) and authors’ calculations.
Dilts Stedman and Pollard’s (2023) industry-level versions of the Kansas City Fed’s Labor Market Conditions Indicators (LMCI) provide evidence that labor markets in interest-rate-insensitive industries were slower to respond to monetary policy tightening during the first year of the current tightening cycle, in line with historical trends. However, labor markets in these industries now show signs of cooling, with the level of activity (a measure of labor market tightness) trending downward since June 2023. In addition, labor market momentum in interest-rate-insensitive industries turned negative in March 2023, even falling below interest-rate-sensitive momentum during the second half of 2023, a sign of softening labor market conditions.