Why is the Fed ignoring its own data?

A James Alexander post

Back in 2014 the Federal Reserve boffins created a Change in Labour Market Conditions Index to check up on the changes in the state of the labour market. It is a broad diffusion index based on 19 underlying data components. It is clearly meant to provide a guide for progress towards or away from the “full employment” half of its dual mandate. It is released the day after the BLS monthly employment report. It monitors unemployment data, participation rates, wages, JOLTs and hiring expectations, etc. It is a very handy single number figure.

And it is not looking good. Monday’s release for March 2016 was the third successive month of negative change. It shows an eerily close relationship to the active monetary tightening undertaken in December by the Fed.

JA LMCI

The Fed has chosen to ignore it. Why? We should be told. It’s one thing telling the market it is wrong, but quite another for a “data-driven” organisation to ignore its own data.

3 thoughts on “Why is the Fed ignoring its own data?

  1. Pingback: MUST BE LIVELY IN THE FOMC THESE DAYS – NGDP Advisers

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