Researchers at the Federal Reserve Bank of Kansas City have published an analysis using a restricted version of their Labor Market Conditions Indicators (LMCI) to assess the state of the U.S. labor market in September 2025. The adaptation comes in response to recent delays in the release of government data, including several key labor market statistics from the Bureau of Labor Statistics’ Employment Situation Report.
The Kansas City Fed’s LMCI typically relies on 24 variables, but with 13 of these currently unavailable, the researchers used a restricted set of 11 up-to-date data series. According to their findings, the restricted LMCI closely mirrors the official version, especially in tracking labor market activity and momentum before and after the pandemic.
Chart analyses show that both the restricted and official level of activity indicators have declined at similar rates in recent months, approaching historical averages. “Our restricted level of activity indicator behaves much like the official level of activity indicator,” the authors noted. Likewise, “our restricted momentum indicator behaves much like the official momentum indicator.” The pre-pandemic correlation between the two versions was 0.99 for activity and 0.95 for momentum.
For September 2025, the restricted LMCI indicated that labor market activity dropped from 0.06 to zero, matching its historical average, while momentum increased by 0.18 points but remained below zero. These changes are consistent with recent month-to-month movements in both indices and suggest a continued gradual cooling in labor market conditions.
The analysis also found that the restricted LMCI can provide real-time forecasts for key labor variables such as unemployment and payroll growth when official data is delayed or missing. Their model estimates an unemployment rate of 4.4 percent for September, slightly above August’s figure of 4.3 percent. Payroll growth was estimated at an average monthly increase of 60,000 jobs from July to September, which is higher than some alternative private estimates but within a typical range given statistical uncertainties.
The report concludes that while official government statistics remain essential, tools like the LMCI—especially its data-restricted version—can help policymakers monitor labor market trends during periods when standard data releases are delayed or incomplete.
“The views expressed are those of the authors and do not necessarily reflect the positions of the Federal Reserve Bank of Kansas City or the Federal Reserve System.”
