U.S. Unemployment Just Hit Its Lowest Rate Since 1969—Economists Aren't Optimistic It'll Last

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The U.S. labor market started 2023 on a high note. The economy added 517,000 jobs, according to the Labor Department, far exceeding the 187,000 jobs the Dow Jones had anticipated.

Among the Bureau of Labor Statistics' findings for the month was also the market's historically low unemployment rate of 3.4% or 5.7 million people. That's the lowest it's been since 1969. The rate "continues to show the we have an especially tight labor market," says Ben Zipperer, economist at the Economic Policy Institute, meaning one in which workers have a lot of opportunities.

"We're clearly not in a recession," he says.

Though the unemployment rate is a key measure in how the labor market's doing, it doesn't necessarily give the full picture of who's not working. The unemployment rate measures the number of people who are out of a job and are actively looking. There were also 5.3 million people who wanted a job but weren't looking and therefore were not counted in the statistic.

As far as the future of unemployment is concerned, economists aren't certain this rate will continue.

One reason is the debt ceiling, or the amount of money the U.S. government is allowed to borrow to pay for programs like Social Security and Medicare. It hit its limit in January and congressional Republicans and the president are currently in talks about lifting it.

"If congressional Republicans prevent [the government] from spending money by not extending the debt limit, then that will result in massive spending cuts," says Zipperer. "And that will cause layoffs of government workers."

There's also the matter of Federal Reserve interest rate hikes. This week the Fed raised the rate by a quarter of a percentage point. "If it raises its own rates too aggressively," says Zipperer, "that will make it more expensive for businesses to expand and hire people."

"I kind of assume that this low [unemployment] rate is temporary for the time being," says Steve Kamin, senior fellow at the American Enterprise Institute. "As Fed interest rates start biting more, as the economy slows and the labor market tightens, unemployment should start moving back up."

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