The latest jobs report shows a stunning 4.8 million jobs were added back into the economy in June. That’s on top of 2.5 million jobs added in May. Both represent the two biggest monthly gains in U.S. history. Although they “shattered expectations” as the White House wrote in a headline, there’s more to know about the status of the current job market. (1)
The COVID-19 pandemic that shut down our economy put 22.2 million people out of work during the first two months of the crisis. The addition of 8.3 million jobs in the last two months is an impressive turnaround, but it still leaves millions of formerly employed people without a job. Although companies have plans to rehire employees as they reopen and ramp back up, many of those jobs will never come back.
Official Unemployment Numbers
The official unemployment rate in June was 11.1%. That’s down from a peak of 14.7% in April and 13.3% in May. But, the Bureau of Labor Statistics said, those numbers might be substantially lower than they should be due to a misclassification error. It gets the information from a survey conducted by the Census Bureau. Interviewers ask questions about a person’s activity during the previous week to see whether they should be counted as employed, unemployed, or out of the labor force.
The Labor Department had decided that anyone who had stopped working because of the pandemic should be counted as “unemployed” but for some reason, a high number of people were marked as “employed but absent for work.” The government says, that error may have lowered the unemployment rate by about 3% in May, making the true jobless rate about 16.3% instead of 13.3%.
Officials say they had “mostly” fixed the error for the June report, but it is still having an impact. For June, the discrepancy is more like 1%, or an unemployment rate of 12.1% instead of 11.1%. Both numbers are high, however, and represent a long road back to pre-pandemic levels. It wasn’t long ago that our unemployment rate was about 3.5%. But even that doesn’t tell the whole story. Additionally, many of the new jobs are part-time.
Six Ways to Report Unemployment
The Bureau of Labor Statistics measures unemployment in six different ways, but reports just one method as the official reading. The one we hear about all the time is the U-3 measure. That is the total number of people who lost their jobs and are actively looking for new ones. (2)
The unemployment numbers that may be more significant are the U-4 through U-6 measures. The U-4 includes “discouraged workers” which are people who lost their jobs but are not actively looking for new ones. The U-5 reading includes both U-3 and U-4 individuals along with all other people who are “marginally attached to the labor force.” That means people who aren’t currently working or looking for work, but are available for work and have looked within the last 12 months. U-6 includes people who have only been able to get part-time jobs.
The U-1 measure only counts people who’ve been unemployed for 15 weeks or longer. We may see those numbers go up as time goes on in our current situation. The U-2 measure refers to people who found temporary jobs, but are again unemployed.
The U-6 measure includes the most people. The latest report shows it peaked in April at 22.8%. It then dropped to 21.2% in May and 18% in June. So 18% may be a more realistic measure of the unemployment situation and how many able-bodied people who could be gainfully employed if there are jobs to give them.
The number of people seeking jobless benefits is also a good way to track the number of people looking for work. On July 2nd, the Labor Department reported another 1.43 million new weekly claims for unemployment benefits. (3) That’s about the same as it’s been for the last four consecutive weeks after a peak at the end of March of almost 7 million claims. The numbers have been dwindling since then. But even more important are the number of continuing claims. The month ended with a little more than 19 million on the government payroll for benefits.
The recovery of the job market will depend on whether we can decrease the spread of the coronavirus so that people can return to work, and their everyday lives. And more importantly, reducing the number of coronavirus deaths, and hospital capacity.
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(3) Unemployment Claims: MarketWatch