Overview
Palanor: Labor Heat is a single 0–100 read of how taut the labor market is — how much demand for workers is outrunning supply, and how that imbalance is showing up in early-cycle signals before it shows up in the unemployment rate. The unemployment rate is famously lagging; this index is built so it does not have to be.
Why these components
JOLTS job openings and temporary-help employment carry the highest weights because they lead the cycle. Initial jobless claims are sign-flipped so rising claims cool the index. The unemployment rate is recentered against a working NAIRU anchor near 4% so the contribution reads tightness rather than absolute level. The Atlanta Fed Wage Growth Tracker is the wage-pressure pulse — sticky in both directions. The two Google Trends terms (hiring positive, layoff negative) are the public-anxiety proxy: a fast read on what people are seeing in their own networks.
Methodology
Each component is transformed (z-score over 24 months, 12-month % change, or level recentered to NAIRU 4%) and sign-flipped where negative. The weighted sum is mapped through a logistic to 0–100. Missing components renormalize.
Interpretation
Readings above 70 mark a labor market that is running hot — talent acquisition is expensive and slow, wage pressure compounds, services-sector inflation tends to follow. Readings below 30 mark a cooling labor market — temp help is being released, openings are evaporating, and the unemployment rate is about to follow. The most useful early signal is sharp divergence between JOLTS openings and temp help: it tends to lead the headline narrative by quarters.
Caveats
Wage growth in particular is monthly and slow; sharp turns will not show up here for weeks. The hiring/layoff search terms can become contaminated during major news events. The 4% NAIRU anchor is a working assumption; some estimates run higher post-pandemic.