The Bureau of Labor Statistics reported Friday that the economy added 209,000 jobs in July, slightly missing expectations of 230,000. The unemployment rate rose to 6.2 percent.
On the surface, this was a soft report, but it’s not that bad as you dig deeper. The unemployment rate rising to 6.2 percent may not seem like a good thing, but it’s completely expected. As the economy continues to recover, it will draw back in workers to the labor force who had previously given up looking for work. That’s exactly what we see in this report, as the labor force participation rate rose to 62.9 percent.
There was also good news in other parts of report. The BLS revised the June and May numbers up a combined 15,000. The average hourly work week was unchanged at 34.5 hours.
It’s important to keep this all in perspective. Monthly reports are very noisy and the BLS will revise the July numbers over the next two months. A good way to cut down on that noise is by using a three-month moving average. When you use that, you see that the past few months really have seen a slight improvement in the economy:
There are other reasons to have confidence as well. On Wednesday, the Commerce Department revealed that the economy had grown at a 4 percent annualized rate in the second quarter, eliminating any lingering doubts about whether the first quarter’s slowdown was an anomaly caused by severe weather. (It was.) Then, Thursday, the Labor Department reported that workers’ wages had grown by a seasonally adjusted 0.7 percent in the second quarter. That’s certainly good news, but it’s important to look at that number long-term as well, as economist Dean Baker points out. Year-over-year growth was still just 2 percent, meaning real wages continue to be flat.
There were also some potentially worrisome signs in the July jobs report. A broader measure of unemployment—known as the U-6 measure—accounts for workers who want work but aren’t in the labor market and those working part-time that want full-time work. The U-6 measure increased from 12.1 percent to 12.2 percent. Long-term unemployment also rose from 3.1 million to 3.2 million. Those are relatively minor changes though. Ultimately, as the New York Times' Neil Irwin writes on Twitter, this report shouldn't change anyone's current view of the economy. Slow, steady job growth continues.
This post has been updated.