Unemployment rate

The unemployment rate is the percentage of people in the labor force who do not have a job but are actively looking for one, published monthly by the Bureau of Labor Statistics as part of the jobs report. It is one of the most widely cited measures of how healthy the labor market is.

The unemployment rate tends to be a lagging indicator, meaning it often keeps looking fine even after an economic slowdown has already begun, since companies typically cut costs elsewhere before resorting to layoffs, and only start reducing headcount once a downturn is clearly underway.

The Federal Reserve watches the unemployment rate closely because supporting healthy employment is one of its two core goals, alongside keeping prices stable. A rising unemployment rate increases the odds the Fed will cut the federal funds rate to support the economy, while a very low unemployment rate can sometimes worry the Fed instead, since a tight labor market can push wages up in a way that keeps inflation elevated.