Chicago Fed adopts new real-time model to gauge unemployment

Federal Reserve Bank of Chicago announced today, Sept. 23, the adoption of a new mechanism to provide esimates of the US unemployment rate, blending government and private data to offer faster, near real-time tracking of labor market conditions.

The new mechanism is designed to produce a flow-consistent unemployment rate (FCR), which accounts for the dynamics of job finding and job separation. This should help create a more tomely picture of the US labor market.

It relies on set of government data like job flow statistics from the Bureau of Labor Statistics (BLS) Current Population Survey (CPS), integrating them with alternative high-frequency indicators from sources like Indeed, ADP, and Google Trends to offer faster, near real-time tracking of labor market conditions.

According to the updated estimates, the Fed expected the US unemployment rate to remain stable at 4.3% in September. It explained that the employment rate increased slightly but was offset by an uptick in layoffs and terminations.

This is against August estimates for the nonfarm payrolls report, which showed the unemployment rate rising to 4.3% from 4.2% in July — its highest level in nearly four years.