The econometric evidence continues to mount that May wasn’t the start of a new recession in the US. The latest clue is yesterday’s monthly update of the Federal Reserve’s Labor Market Conditions Index (LMCI), which is designed as a “dynamic factor model that extracts the primary common variation from 19 labor market indicators.” Last month’s reading ticked up to a modestly positive value—1.3—for the first time since February. Running the numbers through a probit model quantifies what casual observation suggests: recession risk was low as of last month.
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