Newspaper article The Christian Science Monitor

Unemployment Rate Rises in July: Why That May Be a Good Sign for Economy

Newspaper article The Christian Science Monitor

Unemployment Rate Rises in July: Why That May Be a Good Sign for Economy

Article excerpt

America's unemployment rate edged up in July - and that may be a good thing.

The jobless rate ticked upward to 6.2 percent of the labor force, up from 6.1 percent the month before, the Labor Department said Friday.

The desired trend, of course, is to have the unemployment rate fall as more people get jobs.

But sometimes unemployment can rise even as more people get jobs. That's because an improving economy can draw discouraged workers back into the labor force, based on renewed hope that their job- search efforts will be successful.

That appears to be what happened in July, according to the preliminary monthly figures just released. In the Labor Department's survey of employers, the economy added some 209,000 jobs for the month.

And in the department's companion survey of households (from which the unemployment rate is calculated), the estimate of total Americans employed rose by 131,000.

The unemployment rate rose because, offsetting those job gains, the number of adults in the labor force rose by an estimated 329,000 in the household survey.

"The unemployment rate [rise] needs to be looked at in the context of more people moving into the labour market, which is often an encouraging sign that more people are willing to find work," writes Chris Williamson, chief economist at the data firm Markit in London.

The larger import: Even if the economy hums along at a decent pace as forecasters generally expect, the unemployment rate could remain a bit sticky - not falling as much as job-creation numbers imply.

If that occurs, it can be viewed as a natural phase of the recovery from a very deep recession, which left many Americans unemployed so long that they stopped looking for work and so were no longer counted in the labor force.

At a recent press conference, Federal Reserve Chair Janet Yellen talked about the issue.

"We may see that as the economy picks up steam and we see further recovery in the labor market, that those, let's call them discouraged workers, will return either to unemployment or to employment. And as labor force participation begins to stabilize, the unemployment rate will come down less quickly."

Having greater stability in the "participation rate," as economists call it, is important.

In the years since the recession, the official US unemployment rate has gradually fallen from a high of 10 percent to the current 6.2 percent. The decline is a good thing, but each year since 2008 has also seen a decline in the share of US adults who are active in the labor force, either working or job hunting.

This trend, based on comparing July data for each year, holds true even if you exclude people age 55 and up (where there are a growing number of retirees) and under 25 (where many young people are in college or vocational schooling).

Another way to put it: Today there are more adults in the 25-to- 54 age group than there were in 2006, but about 2 million fewer of them are active in the labor force. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.