There are several aspects to the unemployment report. The headline rate rose last month–which is typically a sign of a weakening job market. Was that the case this time?

Because the overall unemployment rate can be deceiving at times, let’s take a look at the components that make up the overall rate.

Nonfarm Payrolls

The payroll figures for June improved substantially as they were expected to come in at 179K. They surpassed that level and grew by 222K. The job additions are a clear sign of corporate confidence in the economy.

Average Weekly Hours

Average weekly hours are an indication of disposable income. As hours increase, so does pay, providing additional discretionary income. In June, average weekly hours increased from 34.4 hours to 34.5 hours:  A minor increase.

U6 Unemployment Rate

The U6 rate includes the under-employed. This means it represents the 4.4% rate plus all those who are working but not to their capacity due to economic reasons. It currently sits at 8.6%, up from 8.4% in May. After the financial crisis, the U6 rate reached as high as 17.1%.

Participation Rate

The participation rate represents the percentage of people actively in the job market, either working or seeking work. The rate ticked up from 62.7% to 62.8% in June. Therein lies the ‘issue”.  As the rate of participation increases, the unemployment rate increases.

Conclusion

Yes, unemployment ticked up on Friday, but it was not all bad news. In fact it was good news just masked by a slight increase in the overall rate.

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