Below Full Employment Equilibrium

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

percent yeah zero percent unemployment ain't never

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

guess do that now bad times