Why higher unemployment signals a strengthening economy

The unemployment rate rose in June, but that may not be a bad thing.

After hitting an 18-year low of 3.8% in May, the unemployment rate unexpectedly ticked up to 4% last month, as the economy added a surprisingly strong 213,000 jobs, according to the U.S. Labor Department.

The unemployment rate rose as an additional 601,000 Americans entered the labor force, meaning a strengthening labor market appears to have actually coaxed some workers back into the labor force. The labor force participation rate, or the number of people who are actively employed or looking for work, rose to 62.9% from 62.7%. The labor force participation rate is still hovering near historic lows.

Not all of those who re-entered the market were able to find jobs, which contributed to the uptick in the unemployment rate.

The June jobs report marks the longest consecutive, positive monthly job expansion on record, at 93 months.

Figures from April and May were also revised higher, indicating the creation of 37,000 more positions than previously expected.

So far this year, the U.S. economy has added an average of 215,000 jobs per month.

One area that remains sluggish is wage growth, which grew 2.7% when compared with the same period last year. That was under expectations of 2.8%.