Labor market data sometimes show an increase in the number o

Labor market data sometimes show an increase in the number of people employed and an increase in the unemployment rate in the same month. How is that possible?

Solution

We know that as per the definition of labor force it consists of all civilians of 16+ age who are working or looking for a job . Hence labor force = employed + unemployed .

Now unemployed are the people who are looking for a job but have not yet got one . Unemployment rate = unemployed persons / Total labor force * 100

So unemployment rate increases means that number of people unemplyed increases and simultaneouly employed peple is also increasing . This can only happen when the labor force has increased in size . Since LF = Employed + Unemployed , so an increase in size of LF or an increase in labor force participation rate can cause increase in both factors simultaneously . So now more people of age 16+ have either got jobs or are looking for jobs from among the adult population .