If unemployment is on the rise or few new jobs are being created, it is a sign that companies are not expanding and the economy may be slowing down. On the other hand, rising employment rates and large-scale job creation indicate a growing, or even overheated, economy.

The reaction of markets to unemployment

If the economy is doing well, investors may fear that a fall in unemployment (which you would think would be good news) will lead to inflation (more people in work and spending money). Very low unemployment can also be a sign of labour shortages. On the other hand, a fall in unemployment when the economy is in recession is often good news for the markets as it suggests an improvement in the overall state of the economy.