The June jobs report wasn’t all sunshine and roses.
Against a solid rise in employment and a steady jobless rate, underlying unemployment jumped last month. The government’s U-6 measure, which captures the unemployed, those marginally attached to the labor force, and folks working part time because that’s the only work they could find, moved to 14.3% from 13.8% in May. The gain puts the measure back near where it started the year.
By any reckoning, the surge in U-6 was notable. But it was also hard to square against a report that was in most other terms a favorable turn for the labor market.
While the unemployment rate held steady at 7.6%, the nation added 195,000 jobs last month, amid upward revisions to prior month’s job gains. Economists were cheered by the report, and analysts said the slow but steady improvement in the labor sector keeps the Fed on track to ease back on its bond buying stimulus program some time later this year.
Interpreting the U-6 number is challenging. Beyond that, most policymakers say that while they are mindful of the measure, they are primarily focused on more traditional job market measures like the unemployment rate and monthly payrolls change.
But at the same time, Fed officials have said that as they consider the future of their stimulus efforts, they will watch a wide array of labor market indicators to determine the true health of hiring. By that reckoning, the U-6 reading suggests potential trouble.
The rise in U-6 is most likely tied to a rise in discouraged workers and what the government calls “marginally attached” workers, as well as gains in part time unemployment. None of that is surprising given what the measure is designed to capture. The government defines marginally attached workers as those who don’t have a job and aren’t looking for anything, but would work if something became available.
John Davis @JohnDavisforOR
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