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CHART OF THE DAY: Estimating unemployment during the pandemic

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Friday’s headline U3 unemployment rate of 6.9% understates the number of out-of-work people, not by design, but by the peculiar circumstances of the pandemic.

In our estimation, this needs to be taken into account by policymakers around decisions on fiscal stimulus and other policies to stimulate employment.

By adjusting the number of unemployed for the number of people who are not in the labor force but want a job, and the pandemic unemployment rate jumps to 8.0%, 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 6.7%, which is only slightly better than the current U3 unemployment rate. This suggests that the 638,000 increase in payroll employment in Friday’s labor report should be tempered by the enormity of the task in restoring the labor force back to normal.

For point of reference, the U6 unemployment rate was reported at 12.1%. 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.

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About Joseph Brusuelas

@JoeBrusuelas

Joe Brusuelas, “chief economist to the middle market,” is the preeminent voice championing issues and policies facing midsize companies in the United States and around the world. An award-winning economist, Brusuelas has more than 20 years’ experience analyzing U.S. monetary policy, labor markets, fiscal policy, international finance, economic indicators and the condition of the U.S. consumer.

A member of the Wall Street Journal’s forecasting panel, Brusuelas regularly briefs members of Congress and other senior officials regarding the impacts of federal policy on the middle market and the factors by which middle market executives make business decisions. He also frequently offers his insights on the U.S., Canadian and global economies in the financial media. In 2020, he was named one of the 100 most influential economists by Richtopia.

Before joining RSM in 2014, Brusuelas spent four years as a senior economist at Bloomberg L.P. and the Bloomberg Briefs newsletter group, where he co-founded the award-winning Bloomberg Economic Brief. Earlier in his career, he was a director at Moody's Analytics covering the U.S. and global economies for the Dismal Scientist website. He also served as chief economist at Merk Investments L.L.C. and chief U.S. economist at IDEAglobal.