However, the BLS includes a note by BLS Commissioner Beach noting that some misclassification occurred, making the unemployment number as reported 3 percentage points lower than it would otherwise have been:
If the workers who were recorded as employed but absent from work due to "other reasons" (over and above the number absent for other reasons in a typical May) had been classified as unemployed on temporary layoff, the overall unemployment rate would have been about 3 percentage points higher than reported (on a not seasonally adjusted basis). Additional information is available online at www.bls.gov/cps/employment-situation-covid19-faq-may-2020.pdf.(June 6 —See WaPo story, 11 am.)
The principal unemployment rate (U-3) is lower than many economists expected. The BLS warned in a May correction that because its survey is a sample of households during a specific period, unemployment claims data will not necessarily match up to the unemployment numbers. However, the BLS also reports different unemployment rates using a range of definitions. U-6 is the broadest definition, taking into account those marginally attached to the labor force, including total employed part time for economic reasons. This rate was 20.7 percent, more in line with economists' expectations.
Forecasts had been for as high as 25 percent. The unemployment rate was 25 percent (or a smidgeon above) at its peak in the Great Depression. This rate occurred in the early months of 1933. Most economic observers dismiss the idea that we are in a Depression, because they expect the economy to recover quickly as soon as coronavirus cases level off or a vaccine is developed that would allow the public to resume a normal life.
But the following are examples of people who have gone on record as fearing that the May 2020 unemployment number announced this morning could be as high as 25 percent:
- Fed Chairman Jay Powell.
- Treasury Secretary Steve Mnuchin.
- Goldman Sachs.
- Forbes Magazine's Chuck Jones.
One of the backdrops to this was a 48 percent increase in bankruptcies in May.
Consensus: 20 percent. Most commentators, if they gave a projected unemployment number, were close to CNN's Anneken Tappe, who thought the rate will be most likely about 20 percent. Which is bad enough, and off the April chart.
To understand what is happening, behind the unemployment number itself, look at U-6 as well as U-3. U-6 is 20.7 percent. It includes people who are not in the unemployment numbers because they are marginally attached to the labor force or are employed part time for economic reasons.
The number that is ordinarily reported is U-3. In 1933, that was the only number available. But U-6 provides details (insofar as any sample of 50,000 households in the U.S. economy can provide details) of people who are neither employed nor unemployed, an interesting group of potential workers.
Measure
|
Apr.
2019
|
Feb.
2020
|
Mar.
2020
|
Apr.
2020
|
May 2020
|
| U-3 Total unemployed, as a percent of the civilian labor force (official unemployment rate) | 3.6 | 3.5 | 4.4 | 14.7 |
13.3
|
| U-6 Total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force | 7.3 | 7.0 | 8.7 | 22.8 |
20.7
|
The number that is ordinarily reported is U-3. In 1933, that was the only number available. But U-6 provides details (insofar as any sample of 50,000 households in the U.S. economy can provide details) of people who are neither employed nor unemployed, an interesting group of potential workers.
The level of U-6 unemployment is important to look at because of the number of Americans who are on the Payroll Protection Plan and other special programs that are keeping workers off the unemployment rolls.
(Hat tip to Dr. Jurgen Brauer, Geoffrey Hilton and Dr. Farid Heydarpour for their assistance with this post!)
(Hat tip to Dr. Jurgen Brauer, Geoffrey Hilton and Dr. Farid Heydarpour for their assistance with this post!)
