Understanding the unemployment rate is crucial not only for gauging labor supply and demand — essential for the pork industry to efficiently raise and process hogs — but also for its indirect impact on major financial costs of production, such as interest expense. As an agricultural economist at a Farm Credit lending institution, I monitor macroeconomic indicators that influence the cost of capital and interest rates.
The Federal Reserve has a dual mandate to achieve maximum employment through stable unemployment rates and maintain price stability via low inflation. The Federal Open Market Committee (FOMC) typically meets eight times a year for “careful, objective and nonpolitical analysis” of unemployment and inflation data to determine three monetary policies:
1. Open Market Operations:
Adjusting the money supply and influencing interest rates through the buying or selling of government securities.
2. Federal Funds Target Rate:
Setting the target rate for overnight interbank lending, which indirectly affects market interest rates and consumer sentiment.
3. Reserve Requirements:
Determining minimum reserves banks must hold, which influences lending capacity.
Additionally, the Fed sets a specific discount rate, which charges banks for short-term loans. While the FOMC primarily focuses on the Fed Funds rate, changes to the discount rate can also be discussed during meetings. The Board of Governors can adjust the discount rate outside regular meetings.
In May, the U.S. non-farm unemployment rate remained steady at 4.2%, comfortably within the 4% to 4.5% range considered healthy by labor economists. Despite economic uncertainties in early-to-mid-2025, the rate has remained steady at 4.2% for three consecutive months.
In the near term, this stable rate is unlikely to prompt changes in the Fed Funds target rate, which indirectly affects interest rates. Funds rate changes would likely require prolonged higher unemployment (or lower inflation). However, the rise in continuing jobless claims indicates potential underlying challenges, as finding new employment could become difficult for those already unemployed.
While non-farm employees in agriculture are included in this rate, farm labor is separately tracked. A relationship exists between these labor data sets: Very low non-farm unemployment rates can make finding hog farm employees more challenging.
As an industry, we’ve certainly seen this dynamic particularly during the very low (3.9% and less) non-farm national unemployment rate period from December 2021 to April 2024. While the rate has remained above 4% since May 2024, the pork industry continues to face labor shortages.
Support Youth in Agriculture
Solving labor challenges requires more than adjustments to the Fed Funds rate or any other single policy decision. While not strictly economic nor an idea that will single-handedly impact farm labor supply, let’s conclude with an example of inspiring the next generation of pork industry laborers.
From scholarships to support for 4-H and FFA, Compeer offers programs to empower youth to succeed in the agricultural sector and inspire their future careers. If a student doesn’t experience the opportunities of the hog industry, they’ll never know it’s an option. From macroeconomics to micro-experiences, it’s all hands on deck to meet the labor needs of our industry.
