Unemployment

Unemployment Rates

The unemployment rate is the share of the labour force who have no job, are available for work, and have looked for work in the past 4 weeks. The Bureau of Labor Statistics publishes it monthly.

A low unemployment rate typically reflects economic health, as more people earn income, driving consumer spending and investment. Rising unemployment signals economic distress, as businesses reduce costs and consumers curtail spending.

Unemployment typically declines gradually over extended periods, then increases sharply during downturns. During recessions, unemployment spikes dramatically across multiple sectors.

The pattern of slow decline followed by sudden increases reflects human business decisions. Employers delay layoffs until circumstances become unavoidable.

Key Recession Indicator

The Sahm rule says a recession has probably started when the 3 month average unemployment rate rises 0.5 percentage points above its lowest level of the previous 12 months. It has a strong record, but it went off in July 2024 and no recession followed.

This matters fundamentally because unemployment represents the recession’s core impact. As a consumer-driven economy, people need income to purchase goods. Job loss eliminates purchasing power, breaking economic cycles.

Important Caveat

Unemployment functions as a lagging indicator. It confirms recession already underway rather than predicting future downturns.

Self-Tracking Instructions

See the Sahm rule page for the live reading.

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