Unemployment has declined significantly (3.8%) since its pandemic highs (14.7%).
So what does the current unemployment rate portend for the stock market?
Today’s chart helps answer that question by presenting six unemployment rate ranges versus the ensuing average S&P 500 12-month gain.
Conclusion…
The stock market has performed better following a relatively high unemployment rate.
While there are several reasons for this tendency, one major reason is that in times of economic distress the government tends to step in.
What was the lowest U.S. unemployment rate in history?
The lowest U.S. unemployment rate on record occurred in May 1953 and June 1953 and clocked in at a rate of 2.5%.
What was the highest U.S. unemployment rate in history?
Researchers at the National Bureau of Economic Research estimate that the peak unemployment rate reached 25.6% in May 1933 at the height of the Great Depression. The highest U.S. unemployment rate on record (since 1948) occurred in April 2020 as the result of an economic shutdown in response to the COVID-19 pandemic.
What is the U3 unemployment rate?
The U3 unemployment rate is the headline number often reported by the popular press for US unemployment. It attempts to quantify the percentage of people actively looking for a job.
How is the U.S. unemployment rate determined?
To determine the U.S. unemployment rate, the Bureau of Labor Statistics conducts a monthly Current Population Survey.