Unemployment Up

July 16, 2018 - Published by IAG Wealth Partners

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Last week the Bureau of Labor Statistics announced that the unemployment rate jumped up from 3.8% to 4.0% in June and the ranks of the unemployed rose by 499,000 people.

That is great news for the economy.

How can such bad news be great news? By simply using government statistics.

Employers are desperate for qualified workers. Help wanted signs are everywhere you look. If you want a job and have even basic skills you can likely get one fairly easily.

“If you want a job” is the key phrase to understanding how rising unemployment is good for the economy.

The Bureau of Labor Statistics determines the official unemployment rate using data collected by the Census Bureau in its monthly Current Population Survey of 60,000 households.

Through a series of questions, the interviewers determine which of the following categories apply to an individual:

  1. Has a job (employed)
  2. Jobless, looking for a job, and available for work (unemployed)
  3. None of the above (not in the labor force)

The great news about June’s rising unemployment rate is that 413,000 people moved from category 3 (not in labor force) to category 2 (unemployed) in June, not from employed to unemployed.

Over the last 12 months claims for government assistance programs have fallen as people find work more financially rewarding than not working:

  • Ongoing unemployment compensation claims are down 12.6% according to the Department of Labor.
  • The number of people using the Supplemental Nutrition Assistance Program (SNAP) fell by 4.7% between April 2017 and April 2018 according to the Department of Agriculture.
  • The Social Security Administration reports that after years of substantial increases, the number of Social Security disability claims fell by 1.5%.

While higher unemployment isn’t always good news, in this case it is something to cheer.

 

Quote of the week:

Jack Bogle: “The idea that a bell rings to signal when to get into or out of the stock market is simply not credible. After nearly fifty years in this business, I don’t know anybody who has done it successfully and consistently. I don’t even know anybody who knows anybody who has.”


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