Financial encyclopedia

The unemployment rate is regarded as an important indicator reflecting the overall economic situation, which is closely related to our lives. It is also highly valued by economists and financial experts, and it is also an important basis for the Federal Reserve to raise interest rates. What important information is hidden behind the unemployment rate?

What is the unemployment rate?

Unemployment Rate reflects that the proportion of the unemployed labor population in the labor market in the past month is a backward indicator in nature. In addition, when enterprises go to the economy of layoffs, it is very severe. It is generally believed that the unemployment rate will lag behind the economy for about 3-9 months, and there will be a time gap to judge the economic situation from the unemployment and employment data.

When the unemployment rate is low, people's income is stable and the market is naturally prosperous. On the contrary, the consumption expenditure of the unemployed is reduced and the tax revenue is reduced, which further affects the government's fiscal revenue and affects the economy. The unemployment rate can be said to be an important indicator that directly affects investment and consumer confidence.

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Anticipate the trend of the US market

Although the unemployment rate is a backward indicator, its rise or fall will not be immediately reflected in the market, when the unemployment rate falls, it means economic recovery and the market trend will obviously start to move.

Forecast the direction of interest rate policy

As far as the Federal Reserve is concerned, the inflation rate and unemployment rate are regarded as two major indicators to raise interest rates. The inflation target is set at 2%, and the unemployment rate is expected to be 4.7%. When these two data are maintained at the target level, it means that the probability of raising interest rates in the US economy will increase greatly. Therefore, American unemployment data often become the focus of economists, financial media and so on.

Want to grasp the unemployment rate faster.

We can refer to two other employment indicators, namely "the number of people applying for unemployment benefits for the first time" and "non-agricultural employment population (NFP)". The former mainly records the number of people applying for unemployment benefits for the first time in a week in the United States, and the latter represents the employment situation in services, manufacturing and other industries. Knowing these two data, we can grasp the future unemployment rate earlier.