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What Happened in Unemployment?

No question, unemployment is skyrocketing, probably to levels never seen before. Two sets of numbers are reported on the news: 1) new unemployment claims and 2) the unemployment rate. What does it all mean?

  1. New unemployment claims. Unemployment insurance started as a New Deal program, split between federal and state governments, with each state administering a separate program based on federal guidelines, funded by federal and state unemployment taxes (paid by the employer). The program is run from the Employment Training Administration of the Department of Labor. They issued a news release of unemployment weekly claims on May 7, 2020 for the week ended May 2, reporting 3.2 million claims (that was seasonally adjusted, it was 2.8 million not adjusted); it was 30.3 million for the last six weeks.

  2. The monthly unemployment rate is reported by the Bureau of Labor Statistics of the Labor Department (BLS). The reported unemployment number for April was 14.7%. The BLS issued a 42-page report detailing lots of related information. The new media can pick and choose what they want to report.

A little background. I wrote an earlier blog (“Unemployment Statistics” August 19, 2017, which pointed out a few things. The BLS actually has six measures of unemployment from U1 to U6. The one they use is U3, which includes: “those willing and able to work, including temporary and part-time …” U6 is the most extreme (great for those focusing on doom and gloom). This is U3 plus part-time employees as a percent of the civilian labor force, plus it adds to both the numerator and denominator people “marginally attached,” which are not working or looking for work, but want a job. U6 was 22.8 % for April.*

Here is a comparison of a minuscule amount of the data for 2019 to 2020, available in the report:

April 2019 April 2020

Civilian labor force 162,546000 156,481,000

Number employed 156,696,000 133,403,000

Unemployment rate 3.6% 14.7%

These numbers are based on household surveys, compared to business surveys. Households are usually contacted by phone and business usually file electronically. In other words, they are estimates rather than hard numbers. The data captured for April were made during the month and do not incorporate the data through the end of the month. (They are updated later.)

Update: Unemployment claims are filed weekly, reported on Thursday for the week ended the previous Saturday. On Thursday, May 14, 2020, the Department of Labor reported 2.98 million claims filed for the week ended May 9.

June update: the weekly new unemployment claims on Thursday, June 4 was 1.9 million, a total 42 million over the last nine weeks. Shockingly, the unemployment rate reported for May (based on the week around May 12) dropped to 13.3%. U6 was 21.2% a smaller drop from the previous month, but still a drop. These are puzzling numbers when the weekly unemployment claims are still large.

*The other calculations are less useful. For example, U1 is “persons unemployed 15 weeks or longer as a percent of the civilian labor force.” It was 1.1% in April 2020, the same as April 2019.

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