Why is a 6% unemployment rate bad?

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I recently read news (that was presented in a very grim way) that a city’s unemployment rate rose to 6%.

So this means that out of all the people of working-age in that city, 94% of them were employed right?

Isn’t that a really good scenario? 94% is very close to 100% right?

I’m also surprised by this figure because the way the people are talking about the job market, it sounds like a huge number of people are unemployed and only a lucky few have jobs. Many people have said that about half of new-graduates cannot land their first job.

Am I missing something here?

In: Economics

9 Answers

Anonymous 0 Comments

6% unemployment is, in the definition I’m familiar with, 6% of the labor force not employed but looking for work. If you have 94 people in a town employed and have a 6% unemployment rate, then 6 people are looking for jobs.

As far as that being “bad”, you need to think outside the rate. If a lot of people are looking for jobs, then employers are probably aware that they can push their staff harder for the same money because they can’t just find another job. The people unemployed are also a weight on the social safety net if it exists, or are struggling to make ends meet if they aren’t living with someone who does have a job.

When I was growing up, 4% unemployment was seen as nearly as good as you could reasonably expect. I don’t think 6% is too bad, but it could be exacerbated by people being more specialized now so jobs are generally harder to come by. 10% is pretty bad, it means you’re probably competing with far too many people to have a good shot at any role without being stupidly overqualified.

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