Business & Investment

Employment situation is much worse than unemployment rate shows

Along Calculated risk of March 7, 2021 09:13:00 AM

The headline unemployment rate of 6.2% underestimates the current situation significantly.

This is a table showing the current number of unemployed and the unemployment rate (as of February 2021).

Next, we calculated the unemployment rate, including the number of people who left their jobs after early 2020 and the expected labor force growth.

Be expected
July 20 10.2% 16,308 4,370 600 12.9%
August 20 8.4% 13,542 3,637 700 10.8%
September 20 7.8% 12,535 4,377 800 10.7%
October 20 6.9% 11,049 3,737 900 9.5%
November 20 6.7% 10,728 3,919 1,000 9.5%
December 20 6.7% 10,736 3,888 1,100 9.5%
January 21 6.3% 10,130 4,294 1,200 9.4%
February 21 6.2% 9,972 4,244 1,300 9.4%

As the economy recovers Many of those who have left the workforce will probably come back, And there may be more entrants to the workforce (although Recent demographic data is disastrous).

Federal Reserve Board Chair Powell had a similar discussion last month: Return to strong labor market Excerpt:

Employment in January this year was about 10 million below February 2020 levels, significantly short of the aftermath of the worst Great Depression.

After rising to 14.8% in April last year, the announced unemployment rate fell relatively rapidly, reaching 6.3% in January. However, the unemployment rate published during COVID dramatically underestimates the deterioration of the labor market. Most importantly, the pandemic has seen the largest reduction in labor force participation in 12 months since at least 1948. Fear of the virus and loss of employment opportunities in the most affected sectors of the virus, such as restaurants, hotels and entertainment venues. , Many have withdrawn from the workforce. At the same time, virtual school education has forced many parents to leave the workforce to provide all-day care to their children. Overall, nearly 5 million people say the pandemic made it impossible to find a job in January. In addition, the Bureau of Labor Statistics reports that many unemployed people are misclassified as being employed.Correcting this misclassification and counting people who have lost their workforce since February last year as unemployed will help. January unemployment rate close to 10%..
Emphasis added

Click the graph to see the enlarged image.

This graph from the Federal Reserve Board shows the actual unemployment rate and some alternative estimates (mainly due to people leaving the workforce).

Just looking at the unemployment rate in the headline to assess the current situation is a mistake.

The following graph (which I post monthly) shows the rate of employment decline since the onset of each recession since World War II.

Employment recession, chart of the scariest jobsThe second graph shows the percentage of unemployment since the onset of the recession.

The current employment recession was by far the worst in percentage since World War II.

In the worst of the Great Depression, employment fell 6.29% from its previous peak.

Currently, employment is down 6.21%. The current unemployment situation is about the same as the worst Great Depression (there was no pandemic in 2009).

Employment situation is much worse than unemployment rate shows Employment situation is much worse than unemployment rate shows

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