Friday, May 15, 2020

Chicago Fed: The Real Unemployment Rate is Now 30.7%

More than 26 million workers filed for unemployment benefits between mid-March and mid-April alone. The most popular measure of the strength of the labor market is the unemployment rate. Despite its popularity, the official unemployment rate does not capture all workers facing adverse employment conditions. To count as unemployed, one must be out of work and either on temporary layoff or actively looking and available for new work. This leaves out many people who want to work but did not look for work in the period covered by the data, as well as people who may remain employed but at substantially reduced hours, notes the Chicago Federal Reserve.

The Labor Department has alternative broader measures of labor market underutilization that track these individuals, too, but the unique nature of the downturn caused by the Covid-19 crisis and the subsequent stay-at-home directives has put people out of work in ways that even these alternative measures may miss. For example, the evidence suggests that employment losses are likely in the tens of millions, but many individuals are finding it hard to actively look or be available for work and therefore be classified as unemployed.

We have developed a new measure of labor market underutilization that is tailored to the Covid-19 crisis, write  Jason Faberman and Aastha Rajan of the Chicago Fed.

Following the release of the latest Current Population Survey estimates and related micro data, they now calculate the actual value of their measure, the U-Cov rate, is 30.7% (not seasonally adjusted) in April.

The Bureau of Labor Statistics, in contrast, reported an April unemployment rate of only 14.7%.



  1. Its likely that both rates are wrong. I personally am aware of several businesses that are not designated "essential" and yet have continued to operate. In addition, because not all employees decided to continue some workers have actually increased their hours and their income. I realize that millions have applied for unemployment but I know some who are also working in the black market. I doubt that these rates of unemployment are any more accurate than the covid-19 death certificates. I agree that the government has massively destroyed millions of jobs but it is impossible to put a number on this destruction. And depending on the coercive state to somehow measure this destruction is dysfunctional and darkly ironic. There are millions of stories of loss and ruin and I know some of them personally. Their loss is tragic but often their response is heartbreaking. "Just tell me the rules and I know I can succeed." These are the people who will track the government unemployment numbers and government economic statistics in an effort to learn the "rules" and crate a "new normal." People must be able to judge for themselves what is right and what is wrong not wait for a higher power to give them the "rules." Otherwise the incredible injustice that has occurred will be obscured by the "new normal" and injustice will continue. Not sure what the answer is but I am sure that the government and its coercive process is incapable of providing it.

  2. I agree that neither of these figures are correct, but I do believe the true unemployment figure is closer to the 30.7% rather than 14.7%.

    The unemployment rate does not usually account for the Long-term unemployed (individuals who have looked for work in the past four weeks and have been out of work for six months).

    Marginally attached workers (person who has not looked for work in the past four weeks, but has looked for work in the past year) and discouraged workers (person who has looked for work in the past year, but not in the last four weeks) are counted in the unemployment rate.

    Long-term unemployed (individuals who have looked for work in the past four weeks and have been out of work for the last 27 weeks) are also not part of the discussion in this video.

    If long-term unemployed were added to the unemployment statistic, the unemployment rate would be more dystopian.