The rising unemployment rate was 'the best news' in the August jobs report, economist says. Here's why

cnbc.com:

The unemployment rate ticked up to 3.7% in August, the Labor Department said Friday. While more people becoming unemployed may sound alarming, especially against the backdrop of lingering worries about a recession, the increase was for «good» reasons, according to labor economists.

A higher unemployment rate was «the best news in this report,» according to Julia Pollak, chief economist at ZipRecruiter.

That may seem counterintuitive. How can an increase in the jobless rate be positive? The answer lies in the labor-market dynamics underpinning the jump.

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The unemployment rate increased by 0.2 percentage points from 3.5% in July — a level that had tied with early 2020 as the best since 1969.

The movement upward in August was largely attributable to hundreds of thousands of people entering the labor force, economists said.

The government doesn't count individuals as unemployed when they're out of the labor force since they're not actively looking for work. People left the labor force for various reasons during the pandemic, including illness, child and other family care responsibilities and early retirement.

Now, there are more people looking for work and they're officially counted as unemployed, nudging up the jobless rate.

About 786,000 people came off the sidelines last month — a «huge» number, Pollak said.

The labor force participation rate — the share of people in the labor force relative to the U.S. population — grew by 0.3 percentage points to 62.4%; that's a swift increase for a measure that