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Tuesday, January 10, 2017

What is the LMCI and why should we care ? Jeffrey Snider of Alhambra Partners tells us...

...in his concise SEEKING ALPHA post, LMCI : Not Yet Finiished:

The LCMI or Labor Market Conditions Index is "the Federal Reserve's alternate, comprehensive factor model for the labor market" consisting of some 19 separate factors some of which are lagging indicators of economic activity, others leading indicators.

That the LCMI turned negative in December would not be worrisome. What is concerning is the corroborative evidence supplied by the Conference Board's Employment Trend's Index or ETI.

As Snider explains:

That group's Employment Trends Index was down also in December, as five of the eight subcomponents turned negative, a change that wasn't anticipated.
December's decline in the ETI was fueled by negative contributions from five of the eight components. In order from the largest negative contributor to the smallest, these were: Percentage of Respondents Who Say They Find "Jobs Hard to Get," Percentage of Firms With Positions Not Able to Fill Right Now, Number of Employees Hired by the Temporary-Help Industry, Initial Claims for Unemployment Insurance, and Job Openings.
...It's not so much that any of these statistics are contracting, it is more so that they are not actually surging and accelerating. The lack of visible and obvious growth is itself very damning, not just about economic interpretations as they pertain, wrongly, to specific adjectives like "strong" and "solid" but more so the actual economic climate. By all these labor measures, 2016 ended no better than it started, and in many cases, across the jobs market was somewhat worse. 
...Year over year the LMCI was down nearly 6%, the largest decline by far since the "recovery" began. Thus, we have to conclude that though there is much in the index that is lagging and therefore a reflection of past weakness, there isn't anything looking forward that is close enough to offset it and suggest actual (as opposed to the uniform commentary of "strong" no matter what any of these numbers really are) acceleration and economic improvement. To the contrary, there is still the hint of further weakness with the arrows still pointing slightly negative in far too many places.
The issue, as ever, is not imminent recession or not, but rather an end to the depression; to truly exit what has been a distinct lack of any actual cycle. That expiration is just not there, though by all orthodox standards and expectations it should be this far after "global turmoil." It seems the drag of the "rising dollar" is not yet finished. 

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