Unemployment rate

Unemployment rate

Unemployment rate strongly influences the Forex market. The reason is that unemployment serves a good indicator of current economy, despite the fact the figure itself is not as precise in conveying the real situation. Should this rate get above natural level of 4 – 5 %, it more often will lead to social strain, slowdown or even dropdown in the economy and, as a rule, will affect currency rate. Low unemployment rate is also a bad figure, because it deprives incentives to a qualified job and hurts interests of employers.

Unemployment rate is the total amount of able-bodied population expressed as relative quantity. The level itself is calculated as follows. Every month Bureau of Labor Statistics of the U.S. Department of Labor conducts survey of 60 000 households and more than 375 000 enterprises - the establishment survey. Fundamentals of surveys include such statistical data as:

For Household survey: age, sex, marital status, employment status.

For the Establishment survey: average weekwork, average hour earnings, wages.

After that, official amount of unemployed (individuals that are unemployed by the moment, but actively look for a job and can work legally) is divided into a total number of respondents and multiplied into 100. In the result unemployment rate is obtained. It is accepted that natural unemployment level amounts to approximately 4%-5% of total amount of labor forces. There are three unemployment levels that are considered natural:

Frictional: a common phenomenon of unemployment when an individual leaves a job considered inappropriate and is looking for a new.

Structural: employee does not meet company's requirements. For example, company makes decision to cut expenses through dismissals.

Cyclical: unemployment caused by economic and political upheaval.

As a rule, unemployment rate is reported on the first Friday of every month at 08:30 a.m EST (New York) along with Non-Farm payrolls. In Europe similar index is published within the first ten days of every month, whereas in Japan – in the end of month.