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The official (U3) unemployment rate went up one-tenth of a percent last month, to 4%. The broad measure of inflation (U6) held steady at 7.4%. These stats are not alarming. However, U3 unemployment was 3.4% last April, and U6 unemployment was 6.5% at the end of 2022. In other words, the two most important measures of unemployment are trending upwards, albeit gradually. A gradual increase in U3 unemployment of .6% over the past year indicates that the economy is slowing, that we may be entering into a recession. The increase of U6 unemployment of .9% over the past two years is more concerning. U6 unemployment includes discouraged workers. Discouraged workers are people who have given up looking for work. The fact that more Americans would like to have a job but have given up looking suggests that economic conditions have deteriorated for some of us, and will get worse for more of us soon. U3 unemployment does usually rise leading into a recession. U6 unemployment tends to rise faster than U3 unemployment leading into a recession.

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News reports this morning viewed the latest figures from the BLS favorably. If you turn up the heat on a pot gradually a lobster inside the pot will just sit there and cook. Likewise, an economy that cools off gradually may not seem to be at risk of recession. Monthly reports on unemployment rates, and other economic data, should be put into longer-term context, and the trend in unemployment over the past year or two doesn’t look good.

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