WASHINGTON (MarketWatch) — The best part of the mildly disappointing July jobs report was the rise in the unemployment rate to 6.2%.

Usually, you’d think an increase in the jobless rate would be a bad thing, because it means more people are out of work. But sometimes an increase can also show that people are becoming more hopeful about finding a job, leading them to join or rejoin the labor force to begin their search.

In July, that’s what happened: The labor force grew by 329,000 to 156 million in July. The unemployment rate rose for the “right” reason, at least in part.

The number of people who are counted as officially unemployed rose by 197,000, with most of the increase due to people rejoining the labor force or entering for the first time. Just 50% of the 9.67 million unemployed people are there because they lost a job; the rest are people who have started looking for work.

It’s a hopeful sign that so many people are beginning to look for work after so many years of discouragement. The fact that the economy has added 2.5 million nonfarm payrolls in the past year is luring some people back into the pool.

The pool of potential workers is still massive at nearly 24 million. MarketWatch

But the slack in the economy is still massive, and that’s weighing on Janet Yellen and the rest of the policy makers at the Federal Reserve. Their mission is to bring the economy back to full employment, but we’re nowhere near that.

The expanded U6 unemployment rate (which includes people who are too discouraged to look for work, plus those who can only find a part-time job) remains elevated at 12.1%. Using a slightly different definition of discouraged workers, I calculate that there are 23.8 million people who would like to find a job, or would like a job that gives them full-time hours.

The steady growth in jobs is encouraging, but it’s not sufficient, for us or for the Fed. We need more jobs, and we need higher wages. The labor market isn’t delivering, but it’s making progress. And one sign of progress is that more people are actively looking for that job they hope is out there.

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