Effect of Unemployment Rate on the Forex Market

Effect of Unemployment Rate on the Forex Market

Influence of Unemployment Rate in the Forex Market is one of the macroeconomic indicators that has an influence in creating forex market volatility so that we as forex traders must pay attention to it especially when the news is first released. From the employment indicator data, it can be seen that the unemployment rate has an influence on a country’s economic growth. What is clear is that the higher the unemployment rate, the lower the level of public consumption which in turn leads to a decline in retail sales, which in turn has an impact on the level of economic growth.
The unemployment rate indicator is calculated based on the number of workers who do not work and actively seek employment against the total number of workers within a month. But if you are a person who does not work but is not actively looking for work then it is not included in this calculation. So that the unemployment rate data does not necessarily reflect the conditions for sure. But in some countries such as Britain, America and Japan, information on the unemployment rate is very important to note because this data is used to project economic growth.
This employment indicator, namely the unemployment rate can be called the lagging (late) indicator because it appears after a bad economic condition occurs because it is an effect of economic growth. The number of unemployed will increase over time after the economic recession. And the number of unemployed will be reduced again with the increase in the number of job vacancies after the company believes that economic conditions are in an improved condition to recover.

By knowing the amount of unemployment, we can measure the strengths and weaknesses of the labor market. And if labor wage inflation threatens then there will be a possibility that the interest rate will be raised and the stock and bond prices will decrease. And we as investors can utilize this unemployment rate data to compile a new portfolio. And we need to remember that the lower the unemployment rate, the stronger the labor market and vice versa 🙂

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