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Home > Coronavirus > CHART OF THE DAY: Official unemployment number doesn’t tell full pandemic story

CHART OF THE DAY: Official unemployment number doesn’t tell full pandemic story

Feb. 5, 2021 by Joseph Brusuelas

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Friday’s headline January U3 (official) unemployment rate of 6.3% almost certainly undercounts the number of out-of-work people in the United States, not by design, but by the peculiar circumstances of the pandemic.

Our estimate implies a real unemployment rate of 7.5%, which we acknowledge could be much higher — closer to 8.5%.

An analysis of the labor report suggests that the unemployment rate, accounting for the effects of the pandemic, is substantially higher than the headline number. 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 7.5%, as our analysis in the figure below shows.

Even under the best of circumstances, in which all employees on temporary layoffs are reemployed, the unemployment rate remains at 6.2%, only slightly better than the current U3 number.

This suggests that the modest 49,000 increase in January payrolls—which was preceded by a two-month revised decline of 159,000 jobs—should be seen within the context of restoring the labor force back to normal.

For point of reference, the U6 unemployment rate, commonly referred to as the underemployment rate, was reported at 11.1%, a drop from 11.7% in December. The U6 rate includes people who remain marginally attached to the labor force.

Finally, there are signs of scarring in the labor force after nearly a year of limited employment opportunities. More people are dropping out and more people are becoming discouraged, with fewer individuals saying they want a job.

For more information on how the coronavirus pandemic is affecting midsize businesses, please visit the RSM Coronavirus Resource Center.

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Filed Under: Coronavirus, Economics Tagged With: chart of the day, Joe Brusuelas, pandemic, unemployment

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.

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