This labor data trend is a ‘warning sign,’ economist says. Here’s why

The unemployment rate jumped in July, and there’s a detail in the data that has alarmed some economists.

So-called “marginally attached workers,” according to the Bureau of Labor Statistics, are those who are available to work and want a job, but have not searched for a job in the four weeks preceding the survey.

People in that category are at risk of transitioning into “disconnected workers,” or participants who completely drop out of the labor force, whether because of too-low wages, or because of high competition. 

During the past three months, the segment of marginally attached workers grew by a monthly average of 247,000, according to an analysis from Alí Bustamante, a labor economist and director of the Worker Power and Economic Security program at the Roosevelt Institute, a liberal think tank based in New York City. Bustamante assessed marginally attached workers plus unemployed workers as a group, which the BLS refers to as U-6.  

“That’s a warning sign” for the labor market, he said.

More from Personal Finance:
Back-to-school shopping is in full swing
This is ‘the No.1 way to save’ on your wedding, expert says
Kamala Harris’ tax records reveal ‘fairly basic’ approach, experts say

A sustained increase in marginally attached workers would be a negative indicator for the U.S. labor market, said Nick Bunker, economic research director for North America for Indeed Hiring Lab. It’s a sign that people want a job, but are having a hard time finding a job, he said.

However, experts believe it may be too early to tell if the marginally attached worker labor segment will continue to grow, and at such a rapid pace, experts say.

“If there is a sustained increase in marginally attached workers, that would be concerning. But I don’t see a sustained increase right now,” Bunker said.

“This is one category that we really will look at for the next month,” said Teresa Ghilarducci, a labor economist and professor of economics at The New School for Social Research.

The jump could also reflect a correction after much-stronger-than-expected job reports in the last three months, said Ghilarducci, who’s also the director of the Schwartz Center for Economic Policy Analysis and The New School’s Retirement Equity lab.

To be sure, job growth has begun to slow down as more people look for jobs and increase competition for open roles, which showcases a potential “new phase” in the market, Bustamante explained.

“In its new phase, the U.S. labor market remains strong but workers are facing much more competition for open jobs than in the past year,” said Bustamante. “This means that incumbent workers are switching jobs much less often and new entrants to the labor force are experiencing longer job searches.”