Rising unemployment

Rising unemployment

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  • According to the latest jobs reports, US employers hired more workers than expected in August. However, the unemployment rate rose by 0.2% in July to 3.7%, which could be attributed to the Fed's monetary policy of higher interest rates at 2.5% to crack down on rising inflation. Despite this, employers are still keen on hiring more and more people, with 11.2 million job openings on the last day of July and two job openings per unemployed individual.
  • The rise in unemployment can be traced to the influx of workers entering the labor market in August—around 800,000 people. This is not all bad news, seeing as more people are interested in working post-covid due to a reduction in illness and familial responsibilities. The number of people working part-time for economic reasons has also risen to 4.1 million from 3.9 million in July. It is too early to tell if this trend deserves celebration or is shortsighted.

Why it matters

While the rise in labor participation can be seen as a silver lining despite the increase in unemployment, this participation can be due to financial pressures felt by Fed’s new policies. It might not just be an indication of genuine interest but a reflection of economic insecurity, and unemployment may lead to long-term fatigue.

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