National unemployment rate

The unemployment rate is set to rise 0.1 percentage points in 2026, to reach 4.4%. The unemployment rate is a lagging indicator of economic health, with peaks and troughs mirroring the trends in gross domestic product (GDP), but with a delay. This close relationship is largely because demand for labor follows demand for a company's products, with unemployment rising as demand deteriorates.

As many pandemic restrictions were lifted in 2021, following vaccination initiatives, the unemployment rate began to shrink down towards pre-pandemic levels. During 2022, national unemployment levels continued to fall, despite the Federal Reserve's aggressive interest rate hikes and other economic headwinds. The Bureau of Labor Statistics cited that the economy added 360,000 new jobs on average between March and September of 2022. As inflationary and recession concerns lingered, job growth remained positive throughout the economy. According to CAP, steady fiscal support throughout the COVID-19 (coronavirus) pandemic period has created a resilient job market, which has rapidly recovered compared with prior economic downturns. In 2022, the unemployment rate reached 3.7%, slightly below 2019 levels. Positive job growth has enabled the interest rate hikes to combat inflation. In November, US Treasury Secretary Janet Yellen signaled that the Treasury views 4.0% as a healthy and acceptable unemployment rate, following the Federal Reserve's decision to once again raise rates.

In 2024, extended high-interest rates substantially elevated borrowing costs, dampening investment and consumer spending. As businesses grappled with increased financial strain, hiring slowed, leading to labor market cooling. Consequently, unemployment levels rose by 10.6% as companies curtailed expansion and enacted layoffs to preserve margins. Reacting to the deteriorating labor conditions and economic slowdown, the Federal Reserve intervened by cutting interest rates during Q3. This monetary easing aimed to stimulate economic activity by making credit more affordable, encouraging business investment and consumer spending to stabilize employment rates and reignite economic growth. Despite rate cuts continuing during 2025, the unemployment rate climbed to reach 4.3%, with mass layoffs in the government will increasing this number.