ShmoopTube

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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percent yeah zero percent unemployment ain't never

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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guess do that now bad times

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