In June, the unemployment rate dropped to 5.3%—its lowest level since April 2008. June’s reading was healthier than many economists had expected and brings back to a rate last seen before the financial crisis in 2008.
A very low unemployment rate signals a strong economy and is used as a barometer for wage inflation and capacity utilization. A very high unemployment rate is a sign of a weak economy, including slacking capacity and falling wages.
U.S. businesses added 223,000 jobs to the economy, marking the second consecutive month that jobs added were higher than 200,000.
Although the unemployment rate dropped in June, the wage rate disappointed again. In a healthy economy, the average hourly earnings should be around 3.5% or more. Sadly in June, the average hourly earnings increased only two percent.
Another factor that is also concerning is the labor participations rate. The measure indicates how many Americans are employed or looking for work. In June, the rate hit a 37-year low; reflecting that a lot of people aren’t working or have given up trying to look for work.
After so many years of waiting, the Federal Reserve has reportedly signaled that it plans to raise the interest rate if concerns over the labor market eased. On July 16, Janet Yellen said the U.S. economy is on track to bear a rate hike later this year. A rate hike would be a healthy indication that the economy is fully recovered from the financial crisis of 2008.
The U.S. department of labor releases the unemployment rate on the first Friday of each month for the previous month. The next unemployment rate will be released by the labor department on Friday, August 7, 2015.