The Impact of US Unemployment Rate on the Economy

Economic news observers point out that the unemployment rates in the United States and Kentucky have been on the rise, causing some people to worry about economic weakness or imminent recession. Although the unemployment rate has indeed been steadily rising, other indicators and analyses by economists depict a more complex picture of the current economic situation, with signs of sustained growth and opportunities.

Firstly, starting from one of the largest indicators of the economy, the employment rate, Kentucky has been adding new jobs almost every month since the recovery began in the summer of 2020. In fact, in January 2023, the number of employed people in Kentucky exceeded 2 million for the first time. Since then, Kentucky has added 34000 jobs. Last month, the initial recorded employment positions in the state decreased by 5600 compared to the previous month, with the majority coming from the manufacturing and government sectors. It is not uncommon for employment opportunities to decline in July. Similar declines also occurred in July 2023 and July 2018. Compared to the same period last year, the number of job opportunities in Kentucky increased by 23800 in July 2024.

Secondly, information regarding employment growth comes from a federal government survey of employers, which does not include agriculture and self-employed individuals. Another federal household survey provides an additional perspective. These two surveys sometimes display contradictory information, it is important to remember that they measure different things and survey different populations. According to household surveys, the overall labor force and labor force participation rate in Kentucky have been on the rise. This is good news, strengthening our workforce has always been a top priority for business and state policy makers. Although the total labor force in Kentucky is still below pre pandemic levels, this number has been steadily increasing until 2024, adding nearly 30000 workers since the first month of this year. At the same time, the labor force participation rate (measuring the proportion of adult population in the labor force) increased by 0.7 percentage points during the same period.

On the other hand, the unemployment rate is considered a reliable indicator of economic recession and poor economic health. In Kentucky, the unemployment rate has been on the rise since April 2023, rising from 4.0% to 4.7%. This growth began shortly after Kentucky reached its lowest recorded unemployment rate of 3.9% in March and April 2022. Data from July showed 96259 unemployed workers in Kentucky, an increase of 9105 since January 2024. The unemployment rate measures the proportion of people in the labor force who are unemployed but actively seeking work.

In addition, the increase in unemployment rate in Kentucky is mainly due to an increase in new entrants to the labor market, which means key variables may include new immigrants looking for jobs, workers who have just returned from leaving the labor market, higher wages attracting potential workers to leave the field, and possibly higher prices pushing some people into the labor market. However, when these unemployed individuals seek employment opportunities, they may face challenges such as skill mismatches, transportation and housing barriers, and employers being less willing to hire employees in times of economic uncertainty and high interest rates.

Overall, this does not mean that an economic recession will not come. The Federal Reserve's decision to raise interest rates to combat inflation greatly increases the likelihood of an economic downturn. But the latest data and analysis from economists indicate that as inflation shows signs of easing, Kentucky and the US economy will continue to remain strong.