More People Entering Work Force

The unemployment rate was out today, up to 5.1 percent. As usual the headline “80,000 Jobs Slashed” was not the important story.

If you look at the Labor Department’s press release (archived) you will see that the interesting number is in the Household Data. It shows that the Civilian labor force increased by 410,000 last month and that the number of people “not in labor force” declined by 225,000.

What does that mean? Does it mean that people are flooding into the labor force looking for jobs so they can avoid foreclosure on their homes? Does it mean that people see job opportunities? Does it mean that laid-off people are starting new businesses?

At this time of the business cycle, the numbers in the Household Survey (from a BLS survey of households) are typically more optimistic than the numbers in the Establishment Survey (from a survey of employers). But what does that mean?

Anyway, the stock market is going sideways today. That’s because the unemployment rate is usually considered a lagging indicator. Financial markets are typically looking round the corner, six months to a year ahead.

The trouble is that you can’t really see what’s round the corner. That is why markets fluctuate.