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Unemployment rate increases as Fed continues to fight inflation

The unemployment rate remains relatively low, but the small bump could be a sign that high interest rates are slowing the economy.
Unemployment rate increases as Fed continues to fight inflation
Posted at 10:27 AM, Mar 10, 2023

The unemployment rate went up to 3.6% in February, an increase from the 3.4% rate in January that marked a five-decade low, the Bureau of Labor Statistics announced Friday.

The U.S. economy added 311,000 jobs in February, down from 517,000 a month earlier. 

The rise in unemployment is perhaps a small indicator that the economy is beginning to cool off as interest rates have gradually increased over the past year.

There was a pronounced rise in unemployment among teens ages 16-19, going from 10.3% in January to 11.1% in February. There was also a surge in unemployment among Hispanics, going from 4.5% in January to 5.3% in February.

However, the number of people on long-term unemployment, those unemployed for over half a year, continued to decline in February, falling to 1.06 million Americans.

Workforce participation, which is the combined number of people currently employed and those on unemployment, has crept up over the last year to 62.5% after dropping during the onset of the COVID-19 pandemic.

Unemployment and job growth are factors the Federal Reserve considers when deciding to raise interest rates. Raising interest rates generally causes the economy to cool, meaning job losses are expected.

Federal Reserve Chair Jerome Powell said interest rates are continuing to go up as the Fed tries to push interest rates to a normalized 2% annual growth. As of January 2023, the annual rate of inflation was 6.4%, according to the Bureau of Labor Statistics. 

Powell said Wednesday that job losses due to high interest rates are not an “intended consequence.” 

"I would explain to people more broadly that inflation is extremely high, and it's hurting the working people of this country badly, all of them. Not just 2 million of them but all of them are suffering under high inflation, and we are taking the only measures we have to bring inflation down,” he told the Senate Banking Committee.