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I'm new to macroeconomics and trying to understand recent macro news. On June 07 2024 two indicators released:

  1. Unemployment increased from 3.9% to 4.0%
  2. US Nonfarm Payrolls (NFP) rose by 272K in May, after increasing by 165K the previous month.

I thought that when more jobs are created it means that Unemployment must fall. In my understanding it can rise only if total labor force increased or participation rate increased. Recent data shown that participation rate decreased, so does both Unemployment and NFP rise mean that total labor force increased?

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  • $\begingroup$ Do you know what NFP measures? $\endgroup$
    – Giskard
    Commented Jun 13 at 9:37
  • $\begingroup$ @Giskard Nonfarm Payrolls measures the change in the number of people employed during the previous month, excluding the farming industry. $\endgroup$
    – guest6571429
    Commented Jun 13 at 11:52
  • $\begingroup$ Oh, I thought you meant Net Factor Payments :) $\endgroup$
    – Giskard
    Commented Jun 13 at 13:17
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    $\begingroup$ Giskard are you telling the OP to write acronyms in full first time they are used in a context? $\endgroup$
    – Jesper Hybel
    Commented Jun 13 at 15:28
  • $\begingroup$ @JesperHybel Thank you for raising that; it is great advice! But I did genuinely misunderstand. $\endgroup$
    – Giskard
    Commented Jun 13 at 15:45

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If more jobs are created but unemployment increases, it means that labor force participation (LFP) has increased by even more than the number of new jobs created. Unemployment is the number of jobs divided by the LFP.

That being said, some of the people excluded by non-farm payrolls (farm workers, private household employees, etc), may be included in the unemployment rate, so those numbers might not match up always.

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  • $\begingroup$ Yeah, but as I mentioned in the question: "Recent data shown that participation rate decreased", it decreased indeed (prev. 62.7%, current 62.5%), so rise in both NFP and unemployment is due to 1. Huge decrease in farm payrolls or 2. Big increase in population(due to migration for example)? $\endgroup$
    – guest6571429
    Commented Jun 14 at 7:43

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