This morning the Pennsylvania Department of Labor and Industry reported that nonfarm payrolls grew in June by 20,000 and the unemployment rate edged up slightly to 5.6%. A companion survey of Pennsylvania households registered a decline in resident employment in June of 7,000 — the third straight month of declines in this data.
Looking beyond the monthly volatility, nonfarm payrolls have increased by 4,200 jobs a month since December 2015 and resident employment over the same period by 5,900 a month. Both figures are slightly above the average over the whole expansion and signal that, despite the monthly volatility, employment overall is growing.
Although job growth remains above average for the recovery, the unemployment rate has climbed by nine-tenths of a percentage point since December 2015. The rise in the unemployment rate is driven by a rapid rise in the Pennsylvania labor force, which is up 100,000 since December 2015. With resident employment rising 35,500 over this period, the remainder of the labor force increase has registered as a rise in the number of people looking for work.
To see the labor force rising isn’t a surprise. Looking at the percentage of the population with a job in Pennsylvania (figure below) it is clear that there are far fewer people working today (roughly 153,000) than before the recession began. This explains why there remains room for continued growth in the Pennsylvania labor force.
That said, the size of the surge in the labor force in the last six months is a surprise and something to keep an eye on in the months ahead. As long as the growth in the labor force slows from its current eye-popping pace and employment growth continues, I wouldn’t expect a lot more growth in the unemployment rate.