uploads///Unemployment rate Vs SP

The Unemployment Rate Hits a 7-Year Low

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Is the unemployment rate a sign of relief?

The unemployment rate for August provided a huge relief for the US economy when it fell to its lowest figure since the crisis of 2008. August’s unemployment rate stood at a staggering 5.1%. Economists were expecting it to be around 5.4%, but the numbers came in much better.

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Impact of the unemployment rate on the market

Similar to economic indicators we looked at earlier in this series, the unemployment rate negatively correlates with the stock market, as you can see in the above chart. The importance of this indicator is much greater than the other economic indicators already mentioned, so Wall Street assigns a huge significance to these numbers.

In a consumer-driven economy like the United States, the retail sector is the happiest when unemployment goes down. Improving employment means better consumer confidence and better spending for consumer discretionary goods.

The SPDR S&P Retail ETF (XRT) and the Consumer Staples Select Sector SPDR ETF (XLP) provide exposure to the US retail sector. Stocks such as Walmart (WMT), Walgreens Boots Alliance (WBA), and Costco (COST) make up part of the holdings for XRT and XLP.

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