Unemployment Rate

The unemployment rate is basically the percentage of people in the workforce who don’t have a job but are actively looking for one and able to work. It’s calculated by dividing the number of unemployed people who are ready and available to work by the total number of people in the labor force.

It’s important to understand the difference between someone who is unemployed and someone who is not in the labor force at all . For example, students, stay-at-home parents, retirees, or people with disabilities who aren't working aren’t counted as unemployed — they’re not part of the workforce, so they don’t factor into the unemployment rate.

The unemployment rate is known as a lagging indicator , which means it doesn’t predict economic changes — it shows trends only after the economy has already started shifting. Still, it can cause moderate fluctuations in financial markets because it gives traders clues about future interest rates and monetary policy decisions.

When the unemployment rate comes in lower than expected , it often leads to a stronger currency. That’s because investors may expect the central bank to raise interest rates in response to a tightening labor market. On the flip side, if unemployment is higher than anticipated , it can hurt a country’s currency, as markets anticipate lower interest rates or other easing measures from policymakers.