The Bureau of Labor Statistics (BLS) released the Employment Situation for August 2022. The report found that the economy added 315,000 jobs in August, but the unemployment rate increased by 0.2 percentage points to 3.7 percent. Given the continued strength of job gains, a natural question is how the unemployment rate could continue to rise. Here there are two simple answers. First, the number of jobs added and the unemployment rate come from two data sources, so there could be slight discrepancies between the two sources in a given month. Specifically, the jobs number comes from a survey of establishments, while unemployment is calculated from the household survey. The second and more important explanation for the rise in unemployment is that the report found that labor force participation increased substantially in August. The labor force increased by 786,000 people, increasing the participation rate by 0.3 percentage points to 62.4 percent.
While an increase in the unemployment rate is not good news, the fact that workers are entering the labor market will help the labor market function better. The Job Opening and Labor Turnover Survey released on Tuesday showed that the number of job openings was unchanged at 11.2 million. Given that there are still only around 6 million unemployed workers, more workers entering the labor force will help the labor market recovery. Finally, the unemployment rate still remains very low by historical standards.
Finally, despite the good news on labor force participation, the revisions to the two past months showed weaker employment growth than previously reported. The June report was revised down by 105,000 jobs to 293,000, and July was revised down by 2,000 to 528,000 jobs. The three-month average for job growth is almost 379,000 jobs per month. While this is still strong job growth, it is slower than the rapid pace the economy experienced in the initial recovery from the pandemic.
