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The Chicago Fed Labor Market Indicators: Bridging the Gap with Alternative Labor Data

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Abstract

We present the Chicago Fed Labor Market Indicators (LMI): a twice-monthly release that includes the job-finding rate, the job-separation rate, and a forecast for the U.S. Bureau of Labor Statistics (BLS) unemployment rate. To overcome limitations in data availability, the LMI uses partial least squares to combine CPS-based finding and separation rates with higher-frequency alternative and traditional labor market data series—such as unemployment insurance claims, Google Trends searches, online job postings, and survey-based indicators. Our resulting flow-consistent unemployment rate (FCR) correlates strongly with the BLS unemployment rate, and can be used to characterize the current “low-hire, low-fire” nature of the U.S. labor market. We use a Bayesian linear regression centered on a no-change prior to translate changes in our FCR into a real-time forecast for the next BLS unemployment rate reading. In backtesting spanning 2018–2026, our unemployment rate forecast improves on both a random-walk benchmark and the Bloomberg consensus forecast, with the largest accuracy gains during the Covid-19 pandemic when the unemployment rate rose rapidly in a way that was well-captured by high-frequency labor market data.

Suggested Citation

  • Scott A. Brave & Ben Henken & Ezra Karger & Aryan Safi, 2026. "The Chicago Fed Labor Market Indicators: Bridging the Gap with Alternative Labor Data," Working Paper Series WP 2026-09, Federal Reserve Bank of Chicago.
    • Handle: RePEc:fip:fedhwp:103456
    DOI: 10.21033/wp-2026-09
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    JEL classification:

    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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