Utah’s unemployment rate only increased slightly from 1.9% in April to 2% in May, but Utah Department of Workforce Services chief economist Mark Knold said components of why that rate rose are really noteworthy. (Kristin Murphy, Deseret News)
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SALT LAKE CITY – Around this time last year, everyone’s favorite restaurants, bars, entertainment venues started to come out of a pandemic-induced dormancy and open their doors.
This kind of resurgence can make it difficult to accurately compare economic indicators such as job growth, unemployment and employment rates between then and now, Utah Department of Workforce Services chief economist Mark Knold explained Friday. -fair.
Over the past year, Utah’s job growth has remained above the national average, in May reaching 3.5%, while the unemployment rate is also in “rock bottom territory” at just 2%.
While Utah’s job growth is trending down compared to previous months – 4% growth in March and 3.8% growth in April. But Knold said that shouldn’t be a cause for great concern.
“Utah’s slowing growth rates this year is just a reflection of comparing it to an economy that was aggressively waking up (and) expanding a year ago,” Knold said.
While the state’s unemployment rate only rose slightly from 1.9% in April to 2% in May, Knold said the components of why that rate rose — for the first time in two years — are really noteworthy. .
He said unemployment rates could rise for two reasons: people losing their jobs and becoming unemployed, or people “going outside” in search of a job.
“This increase in job search will also increase the unemployment rate,” Knold said.
It might seem counterintuitive that people trying to return to the workforce could increase unemployment rates, but the Economic Policy Institute backed Knold’s claim, saying, “During an economic recovery, high unemployment rates can persist despite an increase in jobs as more workers start looking for work and re-enter the workforce.”
In the current environment, Knold said Utah workers aren’t losing their jobs, so it’s idle workers returning to the job market that is driving Utah’s unemployment rate up.
What is it that is forcing previously idle workers to start looking for work again? Knold said this could likely be attributed to rising prices due to ongoing record inflation.
“Since February, Utah’s total workforce has increased by 25,800 and this is beyond the normal seasonal increases that always occur this time of year with graduations,” he said.
In addition, the labor force participation rate — the percentage of Utahns age 16 and older who are looking for work — has seen rapid growth since the pandemic.
“Since February, it has risen from 67.4% to the current 68% in just three months,” said Knold. “That’s a rapid increase in the workforce in a short period of time.”
All of these factors combine to show exactly why the unemployment rate is rising, even as more people start looking for work.
“If someone doesn’t have a job and decides to look for a job, their decision to look for a job takes them into the workforce,” Knold said. “Until they find a job, they will count towards the unemployed share of the workforce and thus increase the unemployment rate.”
He also said that Utahns and people in general are rational and make decisions about their means to support their lives, and with inflation soaring, consumers are losing purchasing power.
“This can force previously idle workers to re-engage with the workforce and try to find a job, helping to support a family’s means,” Knold said.
He added that the May employment report marks the first time Utah has been influenced by anything other than a strong recovery from the pandemic.
“There are significant emerging economic forces hitting the US economy and the initial impacts of that hit may be starting to show in the Utah job market,” Knold said.
The full job summary can be found here.