Rise in Unemployment Rate is Good News ... Read Why Below

The unemployment rate increased from 7.8% to  7.9% last month. That's actually good news, and let's see why.

Good News! The Unemployment Rate Rose says this:

"The U.S. unemployment rate rose to 7.9% in October, but behind the increase was some good news evidenced by a fall in a broader measure of unemployment to 14.6% from 14.7% a month earlier.

The increase in the main unemployment rate was driven by positive factors. In previous months, the rate has fallen because more Americans were no longer looking for work. This month the rate increased because the opposite trend was occurring. For the second month in a row, the labor force increased, as more people were seeking jobs. That could be a sign of confidence in the state of the labor market. . . .

Underlying the increase in the jobless rate were more positive numbers. The number of people who say they are working increased by 410,000. Meanwhile, even though there were 170,000 more people unemployed, the total work force rose by a much larger 578,000. That offers another signal that discouraged workers may be returning to the labor force.

Another positive sign came from the decline in the broader unemployment rate, known as the “U-6″ for its data classification by the Labor Department. That includes everyone in the official rate plus “marginally attached workers” — those who are neither working nor looking for work, but say they want a job and have looked for work recently; and people who are employed part-time for economic reasons, meaning they want full-time work but took a part-time schedule instead because that’s all they could find.

In October, the number of part-time workers who would like full-time jobs tumbled by 269,000. That came after a big surge in September. The decline in the number of workers part-time for economic reasons could come from them either losing their jobs or finding full time work. But considering the very modest uptick in the number of unemployed, it’s likely that most of part-timers were able to find full-time positions.

The increase in the unemployment rate may come as a shock, considering that the number of jobs in the economy rose by a healthy 171,000 last month. That’s because the number of jobs added to the economy and the unemployment rate come from separate reports. The number of jobs added comes from a survey of business, while the unemployment rate comes from a survey of U.S. households. The two reports often move in tandem, but can move in opposite directions from month to month."

SUMMING UP

So the fact that the unemployment rate ticked up slightly last month is a sign that more people are looking for work and probably because they have confidence that the economic recovery is for real.

But let's not get carried away. 171,000 new jobs is about one half of what's needed in a stable and growing economy. And we're a long way from anything approaching that magic 300,000 new jobs number.

Oh well, at least we're halfway there.

Thanks. Bob.