In February, the unemployment rate reflected a prosperous market in the United States with ideal conditions for anyone looking for a job or wanting to negotiate a raise.
Since then, the effects of COVID-19 have changed all of those plans, and more than 30.3 million people have applied for unemployment benefits.
The unemployment rate in the US rose from an ideal low of 3.5% in February to 4.4% in March, but for April some economists are preparing to possibly reach 20%, which would be the highest unemployment rate since the Great Depression.
But why is this index so important for the market and for us?
The unemployment rate is the percentage of unemployed people in a country’s labor force, and is an index that reflects the state of the labor market. People are considered unemployed if they do not have a job, if they have looked for a job in the last four weeks or if they are willing to work and do not have a job.
We tell you what a high unemployment rate means for your pocket:
According to the Bureau of Labor Statistics when someone loses their job, families lose their income and the country loses its contribution to the economy, which could trigger job loss for others and a domino effect in the country.
According to the information company The Skimm, it will be more difficult to get a job in the post-pandemic market due to increased competition and a reduction in available positions.
Your company could freeze wages. A high unemployment rate usually accompanies economic crises like recessions, the same medium recalls. If the economy is not in good shape, people often spend less, which could create a cycle where companies are probably not in a position to raise their employees’ wages.
Your 401 (k) could suffer. High unemployment rates are equal to a drop in the financial markets. This could scare investors into selling their shares and affect you if you have part of your savings account invested.
The government could intervene more. During extraordinary times the government could make unemployment benefits more flexible, recalls the company The Skimm, something we have seen in the COVID-19 situation in the United States.