Behind the Unemployment Rate Jump

The job market contracted for the 5th straight month with a headline-grabbing 0.5 percent jump in the unemployment rate to 5.5 percent -- the biggest spike in 22 years. The Labor Dept. said the main culprit was the number of people entering the labor force, which surged by 861,000. That's the biggest monthly change since January 1975. (Incidentally, that was two months before the 1973-1975 recession came to an end.)

The reason for the jump? High school and college graduates looking for work:

• The unemployment rate for those over 25 rose considerably less than the headline: 0.2 percent to 4.1 percent.
• Meanwhile, for those between 16-24, the unemployment rate jumped 2 percent to 13 percent.
• But the biggest reason for the jump is the number of high schoolers looking for work. Their unemployment rate skyrocketed by 3.3 percent to 18.7 percent.

That's the biggest jump since the Labor Dept. started keeping records in 1948.

This from Michael Moran of Daiwa Securities, who told Reuters:

It was not a half-bad report except for the unemployment rate which clearly makes it a soft report. Most of the increase in unemployment was from workers entering the labor force and a lot of those workers were young workers, probably people getting out of school and not finding jobs right away. But that's still an indication of a soft economy.

Comments

[Nidhi]

"probably people getting out of school and not finding jobs right away." ==> still sounds dangerous if people are getting out school in order to get a job..

[theinvestingspeculator]

There is big problems in the job market. Every summer school kids are looking for work. This doesn't happen every year. Oil and that report were enough to take the market down. I write about it @ theinvestingspeculator...

[CLH]

The market is easily spooked. Buy when it over reacts. Thanks for the post showing the market was crazy Fri..

[Reinko]

Don't forget these high schoolers are at the lowest end of the wage cost spectrum. And if that labor is not absorbed this is tale telling.

Also: Very often when a more or less unexpected situation like this comes up, very often lots of people come with oversights over the previous years.

Untill I have not observed any relevant information that every year there is a bump up in the unemployment rate because of high schoolers.

We even don't know if the published figures are 'seasonally adjusted' so the high school problem was already filtered out (likely it was because the US government always uses seasonally adjustment when they can, even the bank reserves are seasonally adjusted).

Furthermore the US labor market needs about 150 thousand new jobs every month to catch up with the demographic growth. So in fact there were about 200 thousand jobs too little last month and this has been going on for a month or five now.

[unimpressedpragmatist]

Rise in unemployment rate? Stop fooling yourselves with lame excuses such as school children looking for jobs. In case you haven't noticed, there are massive layoffs and permanent terminations happening all over the country in finance, retail, service, manufacturing, technology, research, biotech, and more. That's where it's happening folks, not high school and college kids and recent graduates looking for employment. Wise up, the country's in trouble and no amount of propaganda and heads-in-the-sand can change or fix this growing problem.

Also, please remember, government is not the answer, it’s the problem!

[Dweeb]

Another problem adding to the summer unemployment is the increased minimum wage. Employers who would normally provide summer work for school kids can't afford to offer as many jobs. Add in the increased fuel cost and the political threat of higher taxes and the small business owner is now trying to cut cost not grow and expand.