What it is
The unemployment rate is a key economic indicator calculated by the Bureau of Labor Statistics (BLS) as part of the monthly Jobs report. It represents the number of unemployed people as a percentage of the total labor force. To be counted as unemployed, an individual must be without a job, have actively looked for work in the prior four weeks, and be currently available for work.
The Federal Reserve closely monitors the unemployment rate as part of its dual-mandate to achieve maximum employment. A low unemployment rate often indicates a strong economy, but if it falls below the Fed's estimate of the natural rate, it can signal inflationary pressures due to a tight labor market and rising wage-growth. Conversely, a rising unemployment rate can indicate an economic slowdown or recession, potentially leading the Fed to consider rate-cut measures.
Why it matters
The unemployment rate reflects economic health and labor market tightness, influencing Federal Reserve policy and your job security and investment outlook.
Reviewed under editorial standardsUpdated September 26, 2026Not investment advice