Here’s why Utah’s unemployment rate rose for the first time in 2 years

Utah’s unemployment rate only had a slight increase from 1.9% in April to 2% in May, but Utah Department of Workforce Services’ chief economist Mark Knold said that the components of why that rate has moved up are indeed worth noting. (Kristin Murphy, Deseret News)

Estimated read time: 3-4 minutes

SALT LAKE CITY – Around this time last year, everyone’s favorite restaurants, bars, entertainment venues and everything in between began to creep out of a pandemic-induced dormancy and open their doors.

This type of resurgence can make it tricky 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.

Over the past year, Utah’s job growth has remained above the national average, in May coming in at 3.5% while the unemployment rate is also in “rock bottom territory,” at just 2%.

While Utah’s job growth is trending downward compared to previous months – 4% growth in March and 3.8% growth in April. But Knold said that should not be a cause for huge concern.

“The slowing of Utah’s growth rates throughout this year are merely a reflection of comparing back against an economy that was aggressively reawakening (and) expanding a year ago,” Knold said.

While the state’s unemployment rate only had a slight increase from 1.9% in April to 2% in May, Knold said that the components of why that rate has moved up – doing so for the first time in two years – are indeed worth noting.

He said unemployment rates can rise for two reasons: People losing their jobs and becoming unemployed or people “coming off the sidelines” looking for a job.

“Such increased job searching will also raise the unemployment rate,” Knold said.

It may seem counterintuitive that people trying to return to the labor force could cause unemployment rates to rise, but the Economic Policy Institute backed up Knold’s assertion, saying, “During an economic recovery, high unemployment rates can persist despite an increase in jobs as more workers begin looking for work and reenter the labor market. “

In the current environment, Knold said Utah workers are not losing their jobs, so it is idle workers returning to the labor market that is increasing Utah’s unemployment rate.

As far as what it is that is compelling previously idled workers to start looking for work again? Knold said that can most likely be attributed to rising prices due to ongoing, record-high inflation.

“Since February, Utah’s total labor force has increased by 25,800 and that is above and above normal seasonal increases that always occur this time of year with graduations,” he said.

Additionally, the labor force participation rate – the percentage of Utahns who are 16 years old and above who are looking for work – has seen rapid growth since the pandemic.

“Just since February, it has risen from 67.4% to the current 68% in just three months,” Knold said. “That is a rapid labor force increase in a short period of time.”

All of these factors combine to paint the picture of exactly why the unemployment rate is rising, even as more people have started looking for work.

“If one does not have a job and then decides to look for a job, their decision to look for a job moves them into the labor force,” Knold said. “Until they find a job, they will be counted in the unemployed portion of the labor force, and thus, they will increase the unemployment rate.”

He also said that Utahns and people in general, are rational and make decisions about their means to sustain their lives, and with inflation up, consumers are losing purchasing power.

“This can compel formerly idle workers to reengage with the labor force and try to find a job, helping to sustain a household’s means,” Knold said.

He added that May’s employment report marks the first time Utah has been influenced by anything other than a strong recovery from the pandemic.

“There are emerging and significant economic forces buffeting the United States economy and the beginning impacts of that buffeting may be starting to show within the Utah labor market,” Knold said.

The full employment summary can be found here.

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Logan Stefanich is a reporter with KSL.com, covering southern Utah communities, education, business and military news.

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