The Heritage Foundation - Leadership for America

The jump in unemployment from 5.0% to 5.5%, the largest jump in over 20 years, is definitely an indication of a sluggish economy. But the sky is not falling. Heritage scholars Rea Hederman, Jr. and James Sherk explain why:

There are, however, two reasons why this large jump in the unemployment rate should not be extremely worrying. First, the unemployment rate increased because a large number of individuals entered the labor force. Actual labor force participation increased to its highest level in over a year. An increase in the participation rate is a good thing for the economy as it increases the number of workers who can contribute to economic growth. Many of these new entrants to the job market could not find work, however, and this increased the unemployment rate.

The other, very unusual aspect is that this monthly report has a large jump in the number of teenagers in the labor market. Teenagers, those ages 16 to 19, make up a very small percentage of the labor force, less than 5 percent. In this month, almost half of the new entrants to the job market were teenagers. Furthermore, the numbers of unemployed teenagers, who have a much higher unemployment rate than workers 20 and older, accounted for about a third of the total increase in unemployment. It appears that the increase in the labor force participation rate and the unemployment rate was affected by the disproportionate number of teenagers in this month’s survey.