The Kansas City Fed’s Labor Market Conditions Indicators (LMCI) summarize the information of 24 labor market variables into two measures: the level of activity and momentum. Typically, these two indicators explain about 80 percent of the variation in their input series, reflecting the well-defined and stable relationships between labor market variables. During the pandemic, these relationships were disrupted and the LMCI’s explanatory power dropped. However, by 2021 the percent of variation explained by the LMCI recovered, suggesting the labor market variables tracked by the LMCI are now behaving much as they were prior to the pandemic (albeit at much tighter levels).
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