Spencer Platt/Getty Images

How did everyone get the unemployment rate wrong?

Samantha Fields Jun 8, 2020
Spencer Platt/Getty Images

On Friday, there was a rare and unexpected bit of good news in the May jobs report — the unemployment rate had fallen, to 13.3%. 

But there was a caveat, one that’s gotten a lot of attention in the last few days: a number of workers had been mistakenly classified as “employed but absent from work due to ‘other reasons’” who should have been classified as “unemployed on temporary layoff,” the Bureau of Labor Statistics wrote in a note at the bottom of the report.

If those workers had been classified correctly, the note said, “the overall unemployment rate would have been about 3 percentage points higher than reported.”

That would put the May unemployment rate at 16.3%, not 13.3%. Similar misclassifications happened in the April and March reports, too. 

In April, the unemployment rate would have been 19.7% rather than 14.7%. In March, it would have been 5.4% instead of 4.4%. 

What to make of the discrepancy? 

Primarily, that it has been difficult to figure out how to count people who are not working because of COVID-19, according to Betsey Stevenson, a professor of public policy and economics at the University of Michigan.

In other scenarios where people are temporarily out of work and not being paid — say, during a federal government shutdown — the BLS classifies them as “employed but absent from work.” 

During the pandemic, the question became, how to classify the millions of people who were out of work because of COVID-19 and shelter-in-place orders?

“Should we call them employed but absent from work, or should we count them among the unemployed?” Stevenson said. “The BLS decided it would count them among the unemployed.”

But despite that intention, “I think that interviewers have struggled with these instructions,” she said. “The way the series of questions are asked can lead a person to say, ‘well, no, I have a job, we’re not working right now because we’re waiting for the governor to reopen the state.’” 

That has lead to many people being classified as employed but absent from work, rather than on a temporary layoff.

“Realize that the unemployment rate is just a set of self reports,” Stevenson said. “This is the pickle the BLS has got themselves in right now, is that they do not make ad hoc adjustments. They do not go through and say, that person said they were employed, but I think they were unemployed. Let’s move them.”

Instead, they put a note at the bottom of each jobs report explaining the data — and the discrepancies. 

“There does seem to be a mistaken notion that this is some kind of interference or some kind of wrongdoing,” Stevenson said. “They’re actually very upfront with the idea that if you want to reclassify these people as unemployed, this is exactly the unemployment rate you would get.”

At the bottom of the May report, the note also said “BLS and the Census Bureau are investigating why this misclassification error continues to occur and are taking additional steps to address the issue.”

COVID-19 Economy FAQs

Millions of Americans are unemployed, but businesses say they are having trouble hiring. Why?

This economic crisis is unusual compared to traditional recessions, according to Daniel Zhao, senior economist with Glassdoor. “Many workers are still sitting out of the labor force because of health concerns or child care needs, and that makes it tough to find workers regardless of what you’re doing with wages or benefits,” Zhao said. “An extra dollar an hour isn’t going to make a cashier with preexisting conditions feel that it’s safe to return to work.” This can be seen in the restaurant industry: Some workers have quit or are reluctant to apply because of COVID-19 concerns, low pay, meager benefits and the stress that comes with a fast-paced, demanding job. Restaurants have been willing to offer signing bonuses and temporary wage increases. One McDonald’s is even paying people $50 just to interview.

Could waiving patents increase the global supply of COVID-19 vaccines?

India and South Africa have introduced a proposal to temporarily suspend patents on COVID-19 vaccines. Backers of the plan say it would increase the supply of vaccines around the world by allowing more countries to produce them. Skeptics say it’s not that simple. There’s now enough supply in the U.S that any adult who wants a shot should be able to get one soon. That reality is years away for most other countries. More than 100 countries have backed the proposal to temporarily waive COVID-19 vaccine patents. The U.S isn’t one of them, but the White House has said it’s considering the idea.

Can businesses deny you entry if you don’t have a vaccine passport?

As more Americans get vaccinated against COVID-19 and the economy begins reopening, some businesses are requiring proof of vaccination to enter their premises. The concept of a vaccine passport has raised ethical questions about data privacy and potential discrimination against the unvaccinated. However, legal experts say businesses have the right to deny entrance to those who can’t show proof.

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