Business Environment Profiles - United States
Published: 16 July 2025
National unemployment rate
4 %
-11.7 %
The unemployment rate measures the proportion of Americans aged 16 and older who are currently unemployed and looking for work. This measure does not account for individuals who have given up on searching due to a lack of opportunities or otherwise, such as discouraged workers. The data presented in this report are annual averages based on unadjusted monthly data sourced from the Bureau of Labor Statistics (BLS).
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During 2025, the national unemployment rate will reach an estimated 4.3%, representing a 0.3 percentage point increase from the previous year. The rise follows a period of persistent high interest rates through 2024 that significantly elevated borrowing costs, dampening investment and consumer spending. As a result, businesses slowed hiring and enacted layoffs to preserve their profit margins. The Federal Reserve responded to growing economic uncertainty by cutting rates in Q3 2024, but have has been reluctant to continue this policy in 2025 due to the inflationary pressures created by higher tariffs. Additionally, mass layoffs in the government sector will be a key driver of increases in unemployment in 2025.
Between 2020 and 2025, the national unemployment rate displayed considerable volatility. In 2021, as pandemic-related restrictions eased and vaccination rates increased, the unemployment rate began to decline from its pandemic peak, fueled by a return of economic activity and hiring. Additionally, strong fiscal support programs helped sustain job growth during this period. In 2022, despite aggressive Federal Reserve interest rate hikes targeting inflation, the US economy added approximately 360,000 new jobs per month between March and September. This positive job growth allowed unemployment to fall to 3.7%, levels slightly below those of 2019. Treasury Secretary Janet Yellen identified a 4.0% unemployment rate as both healthy and sustainable, meaning the low unemployment levels observed in 2022 allowed for further interest rate hikes in the coming years.
As inflation persisted, the Federal Reserve maintained high interest rates into 2023 and 2024, raising borrowing costs for businesses and consumers. The costlier credit environment curbed expansion plans and hiring, pushing up unemployment by 0.4% in 2024 as companies implemented cost-saving layoffs. This cooling in the labor market continued into 2025, particularly as the Federal Reserve has halted its interest rate reductions to hedge against the possible return of rising inflation due to higher tariffs. Public sector layoffs have been adding to this growth in the unemployment rate, though ongoing legal disputes over the recent government layoffs may limit this impact. Macro trends, such as ongoing labor market adjustments and fluctuating consumer demand, accounted for much of the fluctuation in this period. The gig economy's expansion provided some new employment opportunities, but did not fully offset the headwinds created by tighter monetary policy and weaker demand during periods of restricted lending.
From 2021 to 2025, the unemployment rate declined sharply from its pandemic high before modestly rising again in response to monetary tightening and public sector employment fluctuations. Labor market conditions remain closely tied to macroeconomic cycles and policy responses, with fiscal support and flexible hiring models acting as important stabilizers during periods of elevated uncertainty.
In 2026, the national unemployment rate is projected to reach 4.6%, extending the upward trend wi...
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