Michigan's Increased Unemployment Rate the Result of Growing Labor Force

Despite the state’s unemployment rate increasing from 8.4 percent in April to 9 percent last month, there’s some good news amidst the increase.

And that is the number of people joining the workforce is growing, as is the number of people employed.

The reason the unemployment rate is going up is because the labor force has increased from 4.67 million in April to 4.72 million in August. The number of people employed increased from 4.27 million in April to 4.3 million in August, while the number of unemployed people also increased from 3.9 million to 4.2 million in that same span.

In fact, if the labor force had remained the same since April, the August unemployment rate would have been 7.9 percent, said James Hohman, assistant director of fiscal policy at the Mackinac Center for Public Policy.

“Michigan’s recent spike in unemployment rate is not as bad as it appears,” Hohman said. “The state’s been growing in both labor force and its employment.”

University of Michigan Economist Don Grimes said people should pay less attention to the unemployment rate as an economic indicator.

“For several years the unemployment rate fell more than was warranted by employment growth as people dropped out of the labor force,” Grimes said in an email. “Mr. Hohman is correct that the increase in the labor force is the explanation for the increase in the unemployment rate since April. The unemployment rate has always been a problematic measure of economic conditions, and it has become an even worse measure the past few years due to these ‘weird’ fluctuations in the labor force participation rate.”