The Federal Reserve is tasked with a dual mandate to provide stability of prices (i.e. control inflation), and to promote full employment. Thus, the government tracks many statistics related to inflation and employment figures to give policymakers and the public a sense of trends in the economy that can impact many areas from investment and purchasing decisions, hiring, or the movement of goods, services and people.
The chart below shows the current unemployment rate in the United States at 8.4% which has surprised many investors and commentators. The unemployment rate had been coming down for over a decade since the financial crisis of 2008-09, however, starting in February of this year the unemployment rate spiked to nearly 15% as local governments shut down large swaths of the economy in response to the coronavirus (Covid-19) outbreak.
Prior to the virus outbreak, 152 million people were working in the United States, not counting sole proprietors, volunteers, household workers, farm workers or active duty military, which took the unemployment rate down to 3.5% -- a record low! To put this in perspective, a little under one-half of the US population was working at that time. With the outbreak of the virus, the economy shed some 22 million jobs in just a few short months. The good news from a purely economic standpoint is that we have already regained about half those lost jobs, and we are back up to an employment base of about 141 million workers. The other side of that coin is that unfortunately many workers in health care, travel, and restaurant hospitality industries will likely require many months to a few years to get back to work. One other bright spot is that the number of job openings currently unfilled in the US increased to 6.6 million as of the end of July, according to the U.S. Bureau of Labor Statistics. These unfilled positions generally exist because of differences in skill levels or geography; understandably many are not willing to uproot and move for work when the economy is unsettled. While we have a long way to go to recover from this very difficult year we’ve experienced, both the initial return of half the laid off workers and a large pool of job postings are good news for the economy.