The Bureau of Labor Statistics tracks unemployment and jobs on a monthly basis. The current unemployment rate reveals more about the state of the overall economy and its impact on the average American’s finances.
What the Current Unemployment Rate Means for You
When businesses are hiring, wages rise and fewer people are unemployed. That’s seemingly good news for you and your wallet. But that might not necessarily be the case. Because there are so few unemployed people, employers have to compete even harder to attract employees and get staffed up. That means pay rises–but inflation comes along for the ride. Inflation is makes gas, groceries, and nearly anything else you want to buy way more expensive. The Federal Reserve is typically trying to help you catch a break by raising interest rates, but in doing so also makes borrowing more expensive for consumers and businesses alike. High interest rates make it more expensive for individuals to buy a house or car, and for businesses to invest in equipment or more employees, which hurts the job market.
Difference Between the Unemployment and Jobs Reports
The unemployment rate and figures from the jobs report don’t always tell the same story, because they are taken from two different surveys. The unemployment rate is taken from the household survey of individuals. It describes who is employed and who isn’t based on their responses. The number of jobs added is taken from the establishment report, more commonly called the “nonfarm payroll report.” This survey of businesses describes how many jobs were created or lost by industry. The number of unemployed doesn’t match the number of jobs lost, because these reports are taken from completely different sources. Those discrepancies are expected, and the estimates are revised each month as more data comes in.
How to Use the Unemployment Rate
Keep in mind that the unemployment rate is a lagging indicator. It tells you what has already happened, since employers only lay off workers after business slows down. Companies resist hiring new workers when a recession is over, until they can be sure that the economy will stay strong. The economy could improve for months, and the recession could be over before the unemployment rate drops. It’s not suitable for predicting trends, but it’s useful for confirming them.
Recent Unemployment History
You can check the unemployment rates since 1929 to put this month’s report into perspective, Unemployment stayed above 14% for nine years between 1931 and 1940. The unemployment rate reached a record of 24.8% in 1933 after a few years of increasing. April 2020’s unemployment rate skyrocketed to 14.7% in only one month. Unemployment rose to 10.8% in November 1982, dropped to 3.8% in April 2000, then peaked at 10% in October 2009. These two recession-driven spikes resulted in elevated unemployment levels that lasted for years. Want to read more content like this? Sign up for The Balance’s newsletter for daily insights, analysis, and financial tips, all delivered straight to your inbox every morning!
