Unemployment Rate Skyrockets

The Kansas City area’s unemployment rate jumped from 6.5 percent in December to 8.2 percent in January. This marks the highest unemployment rate since at least 1990. An increase was certainly expected as the national economy slides further and further into recession, but an increase of 1.7 percentage points in one month is still alarming. The Kansas City area can take some solace that it is not alone in such a huge jump. The national unemployment rate jumped from 7.1 percent to 8.5 percent, Missouri’s went from 7.0 percent to 8.7 percent and Kansas’ from 4.9 percent to 6.4 percent. Similar jumps were seen in metro areas across the country.
An increase in the unemployment rate can either arise from fewer people working or more people entering the labor force and looking for work. In January, the labor force was stable, implying that the large jump in the unemployment rate was caused by an equally large drop in the number of people in the region who had a job. In fact, total employment in the region declined 18,000 from December.
People often look at the employment picture as a quick measure of how the economy is doing. Certainly both are trending in the negative direction at this time. However, employment is typically a lagging economic indicator, meaning that the economy is going to show signs of improvement in other areas (GDP, consumption, housing) before we see improvements in employment.