The Labor Market Conditions Index (LMCI) recorded a decline of 2.2 for September following a revised 1.3 decline the previous month, which was originally reported as a 0.7 fall.
The index has fallen in seven of the last eight months, which will maintain an underlying tone of doubt surrounding labour-market trends, although there are still important issues of demand and supply. There is an important risk that employment growth is being restricted by supply difficulties and, in this context, there is an important risk that underlying tightness is being under-reported.
The index has been undermined to some extent by a slightly weaker than expected US employment report. The impact will, however, be offset by the fact that the data counts private payrolls and this was stronger than the headline increase in payrolls given that there was a decline in government jobs for the month.
The LMCI was created by the Federal Reserve to provide a useful snapshot of overall conditions and does have a significant impact on Fed thinking.
The relatively subdued readings over the past few months have helped convince Fed Governors that there is still some underlying slack in labour markets and the latest data will maintain the overall tone of caution. The Fed will, therefore, remain committed to only a very slow pace of tightening.
Market impact was limited with EUR/USD probing daily lows near 1.1070. US Treasuries crept into positive territory for the day as US equities dipped significantly lower.