Puerto Rico Labor Market Conditions Index

What you are looking at: a monthly summary of Puerto Rico's labor market conditions, combining 40 economic indicators into a single index using a dynamic factor model.

Methodology: The PR-LMCI follows the Chicago Fed Labor Market Conditions Index (Brave and Cole, 2014). It extracts the first principal component from a standardized panel of 40 indicators using EM-PCA to handle missing data.

Three outputs:

• PR-LMCI Level: the level of labor market conditions (0 = historical average).
• PR-LMCI Momentum: month-over-month change in the PR-LMCI level.
• Diffusion Index: % of indicators improving (above 50% = broad-based).

Indicator groups (40 series):

• Non-farm payroll employment by NAICS sector (13 series)
• Labor force, employment, unemployment, participation rate (8 series)
• Job flows: BED gross gains, gross losses, net change (3 series)
• Unemployment insurance claims: initial and continued (2 series)
• Tourism: non-resident registrations, hotel occupancy, SJU airport passengers (3 series)
• Construction: cement production, building permits, foreclosures (3 series)
• Trade: exports, imports, cargo throughput (3 series)
• Consumer demand: auto sales, gas consumption, vehicle registrations (3 series)
• Fiscal: income tax, excise taxes, motor vehicle tax (3 series)
• Energy: industrial and residential electric power consumption (2 series)
• Other: total bankruptcies, PR Economic Activity Index (2 series)

Data sources:

• Puerto Rico Planning Board (Junta de Planificacion) — monthly economic indicators
• PR Dept. of Labor, LMI Division — Business Employment Dynamics (job flows)
• US Dept. of Labor, ETA — Weekly unemployment insurance claims
• PR Dept. of Economic Development (DDEC) — Auto sales

What these measure: The hiring rate (black solid) measures gross job gains as a share of total employment. The separations rate (red dashed) measures gross job losses. When hiring exceeds separations, employment is expanding. The shaded area shows the gap.

Data source: PR Business Employment Dynamics (quarterly, interpolated to monthly).

How to read: Black bars show the contribution of hiring (lower hiring pushes UE up). Red bars show the contribution of separations (higher separations pushes UE up). The line on the right axis tracks the actual unemployment rate level.

How to read: Black bars show the model-implied probability for each range of next-month unemployment rate changes. The dashed line shows the historical distribution since 1999. When model-implied probabilities exceed historical benchmarks, that outcome is more likely than usual. The relative odds box summarizes the balance of risks.

How to read: The marker shows the model-implied probability that labor market conditions will improve next month. When the marker is right of center, improvement is more likely than deterioration.

How to read: Values above zero indicate above-average conditions; below zero indicates below-average. The 3-month moving average smooths monthly noise. Grey bands mark the 2006-2012 recession, Hurricane Maria, and COVID-19.

What you see: A close-up of the PR-LMCI with the current reading annotated.

How to read: The diffusion index measures what fraction of the 40 input indicators improved month-over-month. Values above 50% indicate that more indicators are improving than deteriorating (broad-based improvement). Currently at 50.0%.

The PR-LMCI adapts the methodology of the Chicago Fed Labor Market Indicators (Brave, Butters, and Kelley, 2019) to Puerto Rico using locally available data.

Factor model. The PR-LMCI level is the first principal component extracted from a standardized panel of 40 monthly indicators using Expectation-Maximization PCA (EM-PCA), which handles missing observations and ragged edges common in Puerto Rico data releases. The index is normalized so that zero represents the historical average. The PR-LMCI Momentum is the first difference of the level.

Diffusion index. The share of the 40 input indicators that improved month-over-month, smoothed with a 3-month moving average. Values above 50% indicate broad-based improvement.

Labor flows. Hiring and separations rates are derived from the PR Business Employment Dynamics (BED) program, which reports quarterly gross job gains and losses. Quarterly flows are converted to monthly rates by dividing by 3, then expressed as a percentage of total non-farm employment. The contributions to unemployment rate change decompose month-over-month UE changes into the portions attributable to changes in the hiring rate (downward pressure when hiring increases) and the separations rate (upward pressure when separations increase).

Probability forecasts. The unemployment rate change probability distribution compares model-implied probabilities (based on recent flow dynamics) against the historical distribution of monthly UE changes since 1999. The momentum gauge summarizes the net balance of improvement vs. deterioration risk based on the recent trajectory of the PR-LMCI.

Key differences from the Chicago Fed. The Chicago Fed uses Current Population Survey (CPS) microdata and real-time private sector data (ADP, Indeed, Google Trends, Morning Consult) combined via partial least squares (PLS). These sources are not available for Puerto Rico. Instead, the PR-LMCI uses a curated panel of 40 indicators drawn from the PR Planning Board, BED job flows, DOL unemployment insurance claims, and DDEC auto sales as inputs to a standard PCA factor model. Indicators were selected through a multi-evaluator consensus process prioritizing non-redundancy, category balance, and minimum sample size.

References:

• Brave, S. A., R. A. Butters, and D. Kelley (2019), "A New 'Big Data' Index of U.S. Economic Activity," Economic Perspectives, Federal Reserve Bank of Chicago, No. 1.
• Brave, S. A. and J. R. A. Cole (2014), "Labor Market Conditions Index: LMCI Methodology," Chicago Fed, unpublished.
• Shimer, R. (2012), "Reassessing the Ins and Outs of Unemployment," Review of Economic Dynamics, 15(2), pp. 127-148.

The PR-LMCI data is available for download in CSV format.

• PR-LMCI index — activity, momentum, diffusion (monthly)