The Bureau of Labor Statistics (BLS) had some good news for us yesterday. The unemployment rate increased from 7.8 percent to 7.9 percent.
You read that right: it’s good news that the unemployment rate increased. In fact, economists have been waiting for it to increase, and have been a little disappointed that it didn’t increase sooner.
This might sound a little balmy, but there’s method to this madness. It’s all in the reason the unemployment rate increased.
The unemployment rate is the number of unemployed people divided by the total number of unemployed plus employed. The BLS collects these numbers by contacting 60,000 households every month.
To be “unemployed”, you have to be actively looking for work. People who are aren’t actively looking aren’t included, even if they’d like to be working.
During a severe recession like we just had, lots of people get so discouraged about finding work that they give up and stop looking – or, as economists say, they exit the workforce. They’re no longer considered either employed or unemployed if they’re not actively looking.
When job markets improve after the downturn, many of these discouraged workers again start to look for work. This is a good sign for the economy, and typically indicates that things will continue to improve.
In October, the number of unemployed in the U.S. increased by 170,000, to 12.3 million. At the same time, the number of employed increased by 410,000, to 143.4 million. As a result, the unemployment rate increased from 7.8 to 7.9 percent.
I’ll be anxious to see the JOLT (Job Openings, Layoffs, and Turnover) data that will be coming out on Tuesday, November 6. It will provide more details about exactly what is going on in the job market, and what is (likely) causing it.