Unemployment Rate Increases Despite Job Creation

Economists are increasingly optimistic this month as more than 163,000 new jobs were added to the American market in July, the highest figure in the past five months. This number was encouraging as it was 25 percent higher than had been anticipated for the month — giving people hope for economic growth. But the economic picture is not all rosy.

While the economy seems to be improving and businesses have increased hiring, the unemployment rate in the United States continues to rise. An estimated 12.8 million Americans are still currently without jobs. According to the latest Labor Department report, the national unemployment rate increased slightly from 8.2 in June to 8.3 percent in July.

Several Industries Add Jobs

The increase in new job hiring is not limited to one industry, according to reports. Out of the estimated new hires in July, approximately 49,000 were added to the professional business services.

An estimated 38,000 jobs were filled in the education and health services industry, with leisure and hospitality positions increasing by about 27,000.  While manufacturing grew by 25,000 jobs, government and construction both declined a bit overall.

While the recession officially ended in 2009, reports indicate the economy is still struggling three years later as the market slowly recovers. When the housing market dissolved several years ago, it not only reduced home sales and the chance of new construction, but it affected overall household wealth.

At the same time, consumer spending, responsible for 70 percent of economic output, came to a halt and remains weak, affecting the economic recovery process. Between April and June, the economy only grew 1.5 percent — less than the previous pace of 2 percent. Consumers are also said to be spending less as they try to pay off debt and save for an uncertain future.

Not Enough Jobs to Go Around

People ask, then, why if there is an increase in hiring is the unemployment rate still rising?

The simple answer is there aren’t enough jobs being created quickly enough for people and in turn improve the rate. The numbers, economists say, may also be slightly inflated this time of year because of the high number of students who are categorized as jobless upon graduation from college and enter the highly-competitive job market in the summer.

Some financial experts say the high unemployment rate might be due to the overall uncertainty people are feeling about the future — businesses are wary of adding someone new to their payroll.

Unfortunately, some economists say, the recent growth in hiring is too low to make a marked difference in the unemployment rate. To keep up with the number of people who enter the job market, the economy has to add about 100,000 jobs per month. To make a significant difference in the jobless rate, at least 250,000 jobs have to be created per month.

While the current numbers are positive, people are still having difficulty finding employment. There are an estimated three unemployed people for every one job opening, according to the Economic Policy Institute. This figure is an improvement from the summer of 2009, however, when the ratio of unemployed people to jobs was 6.7 to 1.

Another positive outlook toward the future: the four-week average of people seeking unemployment benefits has fallen for six weeks in a row.