Unemployment has drawn increased attention in recent months, prompting questions about the broader health of the US economy. A closer look at the data provides important context for understanding what current labor market conditions do, and do not, signal.
Main Takeaways:
The Unemployment Rate in the US (monthly data) was flat for the third consecutive month at 4.3% (not seasonally adjusted). The number broadly reported by news outlets was 4.6%. This was based on seasonal adjustment factors which, we assert, tend to distort the data in the short run. The chart below shows that either number, 4.3% or 4.6%, is not a pain point for the US economy. Under normal circumstances, the current unemployment rate would not be cause for alarm or necessitate action by the Federal Reserve.
The 12MMA trend below illustrates how low the Unemployment Rate still is, even though it has been creeping upward. From ITR Economics’ perspective, highlighting a modest uptick in the unemployment rate without acknowledging its persistent low level presents the trend out of context. When viewed in full historical perspective, the data does not justify concern or fear; rather, it remains broadly reassuring.
Leading indicators tell us that Total Industrial Production will continue the sluggish rising trend that began in 2025. The anticipated rise in industrial activity suggests to us that the unemployment rate is not going to “get out of control” or become problematic. The same statement is true based on our outlook for GDP.
Historically, the economy is under duress when the unemployment rate reaches 6.0%. We are a long way from a 40% increase in the unemployment rate. Prepare for a spate of unwelcome news announcing layoffs and closures. Historically, it happens just about every year as we close out one calendar year and head into the next.