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A New Labor Market Stress Indicator

Author

Listed:
  • Rohit Garimella
  • Òscar Jordà
  • Sanjay R. Singh

Abstract

Recessions are periods where the labor market deteriorates rapidly. Supporting business conditions to prevent such deterioration is a core objective of policymakers. In this paper we construct a labor market stress indicator (LMSI) primarily based on state-level unemployment insurance claims data that are observable as often as at weekly frequency. By examining both the geographical spread and the depth of labor market stress buildup, we provide an early indicator whose main function is to alert policymakers of potential economic slowdowns. Because the majority (but not all) of these slowdowns coincide with NBER recessions, the LMSI is also a useful signal of whether the economy is in recession. The paper then evaluates this feature of the LMSI compared with other recent indicators and highlights the strengths and weaknesses of each.

Suggested Citation

  • Rohit Garimella & Òscar Jordà & Sanjay R. Singh, 2025. "A New Labor Market Stress Indicator," Working Paper Series 2025-31, Federal Reserve Bank of San Francisco.
    • Handle: RePEc:fip:fedfwp:102306
    DOI: 10.24148/wp2025-31
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • E66 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General Outlook and Conditions
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General

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