Rising Unemployment Despite Job Addition An Economic Paradox Explained

rising unemployment despite job addition an economic paradox explained.jpg Business

In the latest financial news, the U.S. economy outperformed job growth expectations for August, adding 187,000 positions, a significant increase over the estimated 170,000. However, this silver lining is clouded by a rise in the unemployment rate, which jumped from 3.5% to 3.8% – the highest since February 2022. Furthermore, the average hourly earnings saw a year-on-year increase of 4.3%, falling short of the 4.4% forecast. The revised figures for June and July, coupled with these statistics, signal a slowdown in the U.S. job market.

Despite these indicators, U.S. stocks remained largely resilient, with major indexes experiencing their best week in months. In response to the moderate jobs report, stocks mostly rose on Friday. European markets, however, had a mixed performance. The Stoxx 600 closed flat, and the U.K.’s FTSE 100 saw a 0.34% increase, but other major bourses finished the day in the red. For August, the Stoxx 600 registered a 2.8% loss.

Mixed Signals from U.S. Job Market and Stock Market Performance

More Jobs, Higher Unemployment

The U.S. nonfarm payrolls for August has seen an increase by 187,000, exceeding the estimated 170,000. Despite the rise in employment, the unemployment rate has jumped from 3.5% to 3.8%, the highest since February 2022. This seemingly paradoxical situation can be explained by the fact that while more jobs have been created, even more people have started looking for jobs, leading to an overall increase in the unemployment rate. The average hourly earnings have increased by 4.3% year on year, slightly below the forecast of 4.4%. These figures, combined with the downward revision of June and July figures, indicate a slowdown in the U.S. jobs market.

Stock Market Reacts Positively

U.S. stocks responded positively to the moderate jobs report, with major indexes experiencing their best week in months. Despite mixed trading in European markets, the U.S. market remained strong. The S&P 500 climbed 0.18%, marking a weekly increase of 2.5%, its best performance since June. The Dow Jones Industrial Average added 0.33%, closing 1.4% higher for the week. The Nasdaq Composite remained essentially flat but ended the week up by 3.3%.

Tesla’s Price Cut and Its Impact

Tesla shares took a hit following the company’s decision to cut the prices of its electric vehicles in both the U.S. and China, causing the shares to slide by 5%. The price of Tesla’s Full Self-Driving software, its premium driver assistance option, was also reduced by $3,000. Despite the drop, Tesla’s shares are still up nearly 100% this year.

JPMorgan Chase and the Epstein Saga

JPMorgan Chase has reported transactions related to "human trafficking" by Jeffrey Epstein, amounting to more than $1 billion. The transactions, which date back 16 years, were only reported after Epstein was arrested and took his life in jail in 2019.

What’s Next?

With U.S. markets closed for Labor Day, investors will have to wait to see if the positive momentum can be sustained in September, a month that has historically been the weakest for stocks.


While the increase in new jobs is a positive sign for the U.S. economy, the rise in the unemployment rate indicates a growing labor force and a potential slowdown in the job market. This could ultimately lead to a balancing of supply and demand in the job market, relieving concerns about a hot job market contributing to inflation. As for the stock market, the positive response following the jobs report suggests investor confidence, which might help defy September’s reputation as the worst month for stocks.

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