The Federal Reserve has been making a little noise as of late as it relates to both if and when interest rates will rise. New Fed Chair Janet Yellen does seem to have some adjustments to make regarding “Fed-speak” and perhaps no one will ever be better at that than former Chair Greenspan himself, asunemployment report trying to explain Fed policy without tipping a hand is rather nuanced.

What we do know is that new Chair Yellen keeps a keen eye on the unemployment rate and in fact has stated the Fed places more weight on this economic report more than any other. Regardless if a loan is to construct a new property or finance an existing one, interest rates matter greatly. But what exactly does an unemployment report contain and how is the data collected?

The unemployment number is a comparison of the number of people in the work force with those who are working and those who are not. There are those who choose not to work or have quit looking for work altogether are not counted in the census. These people who don’t work and have exited the labor force altogether make up another function of the unemployment report, the labor participation rate.

The unemployment report is real data collected by employees of the Bureau of Labor Statistics and is released on the first business Friday of each month. The rate is from the previous month’s data and is currently at 6.7%. The numbers are tallied from a preselected pool of about 60,000 households. A telephone call is made to each household and asks how many working adults are living there, how many are working and if so are they full or part time employees? Is there anyone not working at all but actively looking for work and if anyone has quit the employment pool altogether. This format, with some adjustments, has been functioning this way since 1940.

The more people at work indicate more hiring which is a forward indicator to what businesses think about the economy a few months down the road. That’s why the Fed pays so much attention to the number, it’s what the businesses think and is real, hard data.