There are a certain number of people in the civilian (i.e. non-military) population of the United States who have jobs (or the employed, as they are known) at any particular point in time. There are also a certain number of civilian who are actively seeking jobs (or the unemployed, as they are known). These numbers change from time to time, but in November 2007, the number of employed people stood at about 146,703,000 while the unemployed numbered 7,167,000. The Employment Report, published monthly by the U.S. Department of Labor, provides the employment and unemployment numbers. Together, the number of people employed and the number of people unemployed make up the labor force or workforce. The civilian labor force number was 153,870,000 in November 2007. The unemployment rate is the percentage of the workforce that is out of work. At the time of this writing in November 2007, the unemployment rate was at 4.7%. The highest unemployment rate at the time of this writing was 10.8% in 1982. The lowest unemployment rate was 2.5% in 1953. The US Department of Labor's Bureau of Labor Statistics publishes extensive employment statistics on its website, www.bls.gov.

People who are not employed and are not seeking employment are not counted as part of the workforce. Usually, rising employment and declining unemployment are signs of an improving economy.

Why Low Unemployment Is Not Necessarily A Good Thing

Most beginning Teenvestors think that a low unemployment rate is good for the stock market. In their minds, it is wonderful when everyone has a job. They are shocked to discover that when an Employment Report shows that the unemployment rate is lower than expected, the stock market actually goes down under normal circumstances. In other words, The Dow, The S&P 500, and the NASDAQ Composite Index generally go down in value. Likewise, when the Employment Report comes out which shows that the unemployment rate is higher than expected, the stock market generally improves.

The explanation for the stock market's reaction to the Employment Report is that when the unemployment rate is lower than expected, it means that more people are working. If more people are working, it also means that more people are going to be spending money, and contributing to the GDP. As is sometimes the case, when more people are spending money, the stock market is scared of that dreaded "I" word--inflation. Inflation fears usually causes the stock market to go down.

For young investors, this is a hard thing to accept because while they want the stock market to do well, they also don't want to rejoice when more people are out of work. The only way Teenvestors can feel better about this is to realize that high inflation can cause the quality of life for tens of millions of Americans to decrease in ways that are not always obvious. For example, an increase in mortgage rates (the interest rates that people pay on money they have borrowed to buy their houses) which is caused by inflation could cost home owners a few hundred dollars more a month, could discourage people from buying homes in the first place, or could disqualify people who want to borrow money to buy a home. Skyrocketing heating oil prices could mean that some people may not be able to afford oil to keep warm in their homes during winter.