Friday’s headline U3 unemployment rate of 6.7% is probably an undercount of the number of out-of-work people in the United States, not by design, but by the peculiar circumstances of the pandemic.
An analysis of the labor report suggests that the unemployment rate, accounting for the effects of the pandemic, is 8.0%.
By adjusting the number of unemployed to include the number of people who are not in the labor force but want a job, the pandemic unemployment rate jumps to 8%, our analysis in the figure below shows.
Even under the best of circumstances, in which all employees on temporary layoffs are re-employed, the unemployment rate remains at 6.6%, which is only slightly better than the current U3 unemployment rate.
This suggests that the increase of 245,000 in payroll employment in Friday’s report released by the Bureau of Labor Statistics should be tempered by the enormity of the task of restoring the labor force back to normal.
For point of reference, the U6 unemployment rate was reported at 12%. The U6 rate is commonly referred to as the underemployment rate and includes people who remain marginally attached to the labor force.
For more information on how the coronavirus is affecting midsize businesses, please visit the RSM Coronavirus Resource Center.