The economy: jobs, GDP and recessions, explained
The few numbers that say whether the economy is growing or shrinking, and what they mean for getting a job.
"The economy" is all the buying, selling, making and working in a country. Economists track it with a few big numbers, called economic indicators, that come out on a schedule and often move the stock market.
GDP (gross domestic product) is the total value of everything produced in the country. It's reported every three months. If GDP is growing, the economy is expanding. If it shrinks, the economy is contracting.
The unemployment rate is the share of people who want a job and are looking for one but don't have one. It comes out the first Friday of most months in the jobs report, along with how many jobs employers added. Weekly jobless claims, the number of people newly filing for unemployment benefits, give an earlier hint.
Inflation measures how fast prices are rising.
Economies move in a business cycle: growth, a peak, a slowdown, a low point, then recovery. A recession is a significant, widespread drop in economic activity that lasts more than a few months. A popular rule of thumb is two quarters in a row of falling GDP, though in the U.S. a group of economists makes the official call by looking at jobs, income, spending and more.
Why it matters to you: when the economy is strong, businesses hire, part-time jobs are easier to find and pay tends to rise. In a recession, jobs get harder to find, especially for young workers. The government and the Federal Reserve try to soften the cycle with spending, taxes and interest rates.
For teachers: covers NC EPF EPF.E.2.1 Macroeconomic indicators and the business cycle; EPF.E.2.2 Microeconomic indicators and the business cycle; EPF.E.2.3 Fiscal and monetary policy: jobs, interest rates and prices.
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Words to know
- GDP
- Gross domestic product: the total value of the goods and services a country produces. It's the main measure of how big an economy is.
- Unemployment rate
- The share of people who want a job and are looking for one but don't have one.
- Recession
- A big, widespread drop in economic activity that lasts more than a few months.
- Inflation
- When prices rise across the economy, so each dollar buys a little less.
- Federal Reserve
- The U.S. central bank, often called the Fed. It raises or lowers a key interest rate to keep prices stable and jobs plentiful.
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More topics
Inflation · Interest rates and the Fed · The stock market · Investing · Budgeting · Paychecks and taxes · Credit cards and credit scores · Loans and debt · Banking and saving · Insurance · Scams and identity theft · Supply and demand · Tariffs and trade
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