Employment Indicators - Lesson 3
In our previous lesson, we presented various indicators regarding inflation. In this lesson, we will discuss indicators related to employment.
Certain Central Banks have dual mandates where they are expected to maintain inflation at current levels through monetary policy with the Fed’s goal being described as “maximum employment, stable prices, and moderate long-term interest rates”, hence full employment is sometimes considered to be at a 3.5% unemployment rate, therefore traders should be wary of employment indicators mentioned below as they are imperative to central bank policy.
Possibly the most widely known labour market indicator, it measures the number of unemployed people as a percentage of the labour force. Be advised that the rate does not measure the unemployment in the passing of time, but it is more like of a photograph of the current situation or if you prefer the month it relates to. Hence the rate rises instead of accelerates and such a rise could be a negative signal for the currency it relates to as that would imply that the unemployed have risen in relation to the total workforce with possible adverse effects on the growth rates of the economy. On the flip side, a drop in the rate could provide some support for the respective currency.
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