Forex News Fundamentals / Highly Affecting Economic Market Data – Part 2
Price movements in financial markets, even in real markets, are strongly influenced by some economic data. To increase our knowledge as investors, traders and analysts, let us continue the discussion of economic data that greatly affect the market.
In Part 1, the FS88 Research Division team has reviewed the employment situation data. Now we will explore the unemployment rate in a country that became one of the economic reflections of the country.
The unemployment rate is the number earned from the number of unemployed people divided by the number of labor force multiplied by 100 percent. Unemployment alone means the number of people who are at work age and are looking for work.
Unemployment in a country can not be lost at all because there is unemployment called frictional unemployment (frictional unemployment) that is unemployment due to the entry of new workers like people who graduate school and also people who change jobs or people who are fired.
There is also unemployment structural (structural unemployment) that unemployment occurs because the economy is changing so that the supply and demand of labor also changed.
So called full employment if the lost only cyclical unemployment (cyclical unemployment) is unemployment caused by the business cycle.
The unemployment rate is important to learn because unemployment is one of the macroeconomic indicators and causes wasted resources. In addition, for people who are unemployed will cause problems such as stress or potentially will lead to social and security vulnerabilities in the environment and the country.
The logic that can be used by investors or traders to address this unemployment rate as follows:
- The first assumption that can be used when this data increases compared to the previous period, it can be ascertained the conditions of a country’s labor will bring problems both to the economy and the security situation that has the potential to cause conditions that are not conducive.
- The government as a regulator of fiscal policy will be burdened with high levels of unemployment. The government should provide funds to create jobs or provide some kind of incentive or business capital assistance so that they can be self-sufficient in providing daily necessities such as opening a shop or a grocery store.
- For the central bank as a monetary policy regulator, one of the steps to be taken is to lower the interest rate. The purpose of lowering interest rates or loosening monetary policy is to lower the interest rate on investment credit and aim to lower the value of its currency so that domestic business activities are more attractive to domestic and foreign investors.
The most important goal of the central bank is to increase domestic business so that investment activity will increase and the economy will automatically improve where the manufacturer or company or businessman needs more manpower. This will gradually bring up the second assumption.
If the above policy succeeds then the unemployment rate will decrease, so the second assumption will soon be formed. This second assumption is when the unemployment rate in this period is lower or better than the previous period.
As we know that the lower the unemployment rate the better the economic condition of the country. It is seen that consumer purchasing power will increase as wages and employment also rise.
Purchasing power increases then all business lines will also improve. Increased grocery store sales, the property sector is increasingly in demand for homes, buildings and land it sells, banks are increasing in activity as many people take consumption credits like for homes and cars, the manufacturing sector will increase as new goods orders increase.
The impact of the second assumption is that the government will limit fiscal assistance such as capital incentives will be lowered so that the state budget will be transferred to other budget items. In other words, government savings are getting better.
Furthermore, the central bank will begin to tighten its monetary policy (tightening monetary policy) if the condition is achieved. The central bank will stop the stimulus aid and start raising interest rates. With conditions like this then the value of the currency will strengthen and if this happens in the US then the US dollar will strengthen against the world’s major currencies and also against gold.