The unemployment rate rose for all of the right reasons

Economists agree that the May jobs report was good all around. US companies added 280,000 nonfarm payrolls, which was much higher than the 226,000 expected by economists.

But the unemployment rate climbed to 5.5% from 5.4% in April.

How is that a good thing?

Keep in mind that the unemployment rate is function of the number of people unemployed and the number of people in the civilian labour force, which are the people who either have jobs or are looking for jobs. If you don’t have a job and you’re not looking, you don’t count in this equation.

According to the household survey, which is were the unemployment rate comes from, the number of employed Americans increased by 272,000. That’s a good thing. But the number of people who entered the civilian labour force increased by 397,000.

Growth in the civilian labour force is not a bad thing. In fact, when it grows, it often reflects improving labour market sentiment by out-of-work Americans.

Unfortunately, when the growth in the civilian labour force outpaces the number of people becoming employed, the unemployment rate goes up.

But the unemployment rate is going up for all the right reasons.

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