The U.S. economy added more jobs in July, but the overall unemployment rate rose. This may sound counterintuitive, but there’s a simple explanation.
The U.S. economy added more jobs than expected in July, but the overall unemployment rate rose. This may sound counterintuitive since it's natural to assume an increase in the number of jobs will lead unemployment going down. But there's a simple explanation for that.
By definition, the unemployment rate is the number of unemployed people , divided by the labor force , expressed as a percentage. If the unemployment rate goes up, that means the proportion of people looking for a job compared with the total labor force has grown. That's straightforward enough. For the unemployment rate to go up even as there were 187,000 more jobs in August means there were more people who started looking for a job than people who secured one. The implication: The total labor force grew in August.
A growing labor force is a looser jobs market. That probably contributed to the lower-than-expected wage growth last month. As Bank of America U.S. economist Stephen Juneau wrote,"The broad message here seems to be that we are nearing full employment, with supply and demand coming more into balance."
That will come as a relief to Federal Reserve officials worried about a hot jobs market contributing to inflation. Investors, too, cheered the jobs report. They think there's a 93% chance the Fed will keep rates unchanged at its September meeting and a 65.3% chance at its November meeting, according to theMajor indexes rose in response to the jobs report as well. The
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