When the Federal Reserve raises interest rates to fight inflation, the unemployment rate typically rises as the economy slows in response to the higher cost of borrowing. Remarkably, unemployment remained under 4% for 27 months during and after the Fed’s unprecedented rate increases that began in early 2022 — the longest period at this level since the late 1960s. It has risen slightly but remained just above 4% through September 2024. With inflation apparently under control, the Fed has begun to decrease rates, which could help keep employment strong.
Sources: Federal Reserve, 2024; U.S. Bureau of Labor Statistics, 2024
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