The Unemployment Rate Was Higher, but the Employment Rate Held Steady – Real Time Economics

The U.S. unemployment rate increased slightly to 6.2% in July and a broader rate that includes discouraged workers also ticked up to 12.2%, but don’t be discouraged. Those numbers rose mostly for the right reason.

People wait in line for the Cleveland Career Fair.
Associated Press

It looks like people who gave up during the recession and slow recovery are encouraged by recent gains and are coming back into the labor force. Last month, the Journal noted that economists have been expecting this trend to take hold, but too often they have been wrong. One month’s move isn’t enough to declare the wounds of the recession are healed, but after some stagnation earlier this year, the numbers suggest movement in the right direction.

The jobless rate is calculated by taking the total number of unemployed people and dividing it by everyone in the U.S. who is working or looking for work — what the Labor Department calls the labor force. People who have given up looking for work don’t count in that calculation. When they come off the sidelines, and start looking for work, it adds to the number of unemployed and can raise the unemployment rate.

It can be hard to tell the reasons why the number of unemployed rise, since it’s a net number that takes into account millions of people moving through the labor force every month. But the indications are generally positive. More of the newly unemployed came from out of the labor force than from the ranks of the employed. There also was a rise in the number of people unemployed for more than six months, indicating some of the long-term unemployed may have come back into the labor market.

Separately, the broader measure of unemployment, known as the “U-6″ for its data classification by the Labor Department, looks like it also rose for the right reasons. That rate includes everyone in the official rate plus “marginally attached workers” — those who are neither working nor looking for work, but say they want a job and have looked for work recently; and people who are employed part-time for economic reasons, meaning they want full-time work but took a part-time schedule instead because that’s all they could find. The rate rose even though there were fewer part-time workers who wanted full-time jobs. Meanwhile, the ranks of the marginally attached workers is below year-earlier levels.

Another sign of strength is that even though the unemployment rate rose, the ratio of people with jobs in the entire population, which can be thought of as the employment rate, held steady at 59%. One big concern with the recession has been that even as the unemployment rate has dropped, the employment rate has been slow to rise. Some of that is due to demographic factors, meaning that there are more retirees and young people are staying in school longer and that keeps the employment rate lower. But even when you just look at people aged 25-54 years old — prime working age — there is a disparity between the rates. At the start of the recession the unemployment rate for prime age workers was 4% and the employment-to-population ratio was 79.7%.

During the depth of the recession both moved about five percentage points, hitting 9% and 74.8% at their worst, respectively. The unemployment rate for workers 25-54 has improved by 3.8 percentage points to 5.2% in July, but the employment rate has only moved 1.8 points to 76.6%.

The difference in improvement is due to people giving up and leaving the labor force. The employment rate for prime age workers ticked down slightly in July, but it has been improving more quickly this year overall and is up 0.6 percentage point from July 2013. Even though the decline in the jobless rate still is faster than the increase in the employment rate, the lines are moving in the right direction.



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1 August 2014 | 1:53 pm – Source:

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