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Finance: What is the Unemployment Rate?15 Views

00:00

finance a la shmoop what is the unemployment rate so negative like

00:09

shouldn't it be the employment rate at least that way we'd have a bigger number

00:13

and bigger is better in the u.s. right well anyway the unemployment rate in

00:16

this country is tracked carefully because it's one of the Canaries in the

00:20

mine shaft giving us an early heads-up on the direction of the economy well [canary hopping in cage in mineshaft]

00:25

jobs are generally highly volatile in a given range and the government copiously

00:29

inspects this data as it affects so many other things principally the costs of

00:34

renting money has set out by the Fed because high employment stimulates

00:38

inflation and low does the opposite well the government's gonna ask is the

00:42

unemployment rate shrinking too fast I eat everyone's getting jobs well if so [government officials in conference]

00:47

then beware inflation is coming which historically has motivated the Fed to

00:52

raise interest rates in response or constrict the supply of cash out there

00:57

and the opposite is true as well one of the big cocktail party conflicts and if

01:01

you find yourself at a cocktail party debating this notion make like the

01:04

Jordan Peele movie and get out but if you can't and you must debate well there

01:09

is a quote natural rate unquote of unemployment of around five or six

01:13

percent yeah zero percent unemployment ain't never

01:16

gonna happen generally the higher the unemployment rate the worse shape the

01:20

economy is in but remember the unemployment rate doesn't tell the whole

01:24

story the government can help create a bunch of temporary or low-paying jobs

01:28

too cosmetically raise the employment rate in the short term like ahead of an [happy government officials in conference]

01:32

election but the quality of those jobs is probably not great like think temp

01:36

workers at the DMV well after a while of longer term unemployment some people [long line at the DMV]

01:41

will just give up hunting for jobs and if they don't even go on indeed or

01:45

Glassdoor looking for work so they're kind of permanently in the unemployment

01:49

numbers so the unemployment rate might seem to be a bit less dire in that case [unemployed people holding up cardboard signs]

01:53

but in fact well there might still be a lot of people who needed jobs out there

01:56

we don't know we're just looking for some numbers to help us direct

01:59

understanding of where the economy has gone and help us then tweak things so

02:03

interest rates are optimized at the inflation numbers that we want to hit

02:07

got it not everyone is qualified to stick that thing on the back of your

02:11

license plate that shows you red yeah a whole lot of government workers I [hand adds stickers on back of license place]

02:14

guess do that now bad times

Up Next

Finance: What are Unemployment Benefits?
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What are Unemployment Benefits? Unemployment benefits are taxpayer funded welfare stipends intended to assist individuals who have lost their jobs...

Find other enlightening terms in Shmoop Finance Genius Bar(f)