The Unemployment Rate Went Up for A Good Reason

YPSILANTI, MI- MARCH 15: U.S. President Donald Trump speaks to auto workers at the American Center for Mobility March 15, 2017 in Ypsilanti, Michigan. Trump discussed his priorities of improving conditions to bolster the manufacturing industry and reduce the outsourcing of American jobs. (Photo by Bill Pugliano/Getty Images)
Bill Pugliano/Getty Images

The unemployment rate in June ticked up to 3.7 percent from 3.6 percent but that is not a sign that the labor market is weakening.

Quite the opposite. At 3.7 percent, the unemployment rate is close to multi-decade lows. And the reason the rate rose slightly is that the number of Americans looking for work picked up.

The labor force participation rate, which measures the share of working-age Americans working or looking for work, rose to 62.9 percent in June from 62.8 percent in May, ending a few months of weakening participation. That’s a sign that the labor market is still strong enough to be bringing more workers in from the economic sidelines.

In a time of very low unemployment, bringing more Americans into the workforce is a key to economic growth. It also reflects working conditions and wages becoming more attractive over time, meaning the workforce is very likely happier. That’s hard to measure but increasing workforce participation is one of the best signals we have of worker happiness.

And there’s more room for improvement. The current participation rate is still well below pre-Great Recession levels. That means the expansion may continue for sometime without straining the economy because there are still more workers to be drawn back into jobs.


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