Why Were the Unemployment Numbers So Messed Up?

The underestimation is tied to the fact that “the rolls of the unemployed exclude millions who are ready, willing and able to work but are not currently looking for a job because of the pandemic — or who are being incorrectly classified as being employed but not at work when they are, in reality, unemployed,” Kelly added in a report Monday.

The change in continued unemployment claims “should have been a better measure of net employment changes, since they exclude claims filed but denied and net out those hired or rehired from the rolls of the unemployed,” he said.

The continuing claims for unemployment benefits grew by 2.8 million between the April and May survey weeks, he adds, to 14.2 million people. 

‘Misclassification’ by BLS

BLS, which is part of the Labor Department, acknowledged Friday that counting furloughed workers as unemployed would have increased the official jobless rate to 16.3%, an improvement from 19.7% in April.

Its note explained that if this “misclassification error” had not been made, the “overall unemployment rate would have been about 3 percentage points higher than reported.” 

There also was “a large number of workers who were classified as employed but absent from work,” according to the BLS.

“As was the case in March and April, household survey interviewers were instructed to classify employed persons absent from work due to coronavirus-related business closures as unemployed on temporary layoff,” it explained. 

The group added, though, that “it is apparent that not all such workers were so classified. BLS and the Census Bureau are investigating why this misclassification error continues to occur and are taking additional steps to address the issue.”

Why the Discrepancy?

According to Shapiro, the 9 million-person “discrepancy” should be seen in the broader context of how BLS classifies those in the labor force. 

“If you are out of work but didn’t look for a job over the previous four weeks, or couldn’t work for family reasons such as caring for children who are no longer in school, BLS says you are out of the labor force,” he explained. “If you’re not in the labor force, you’re not unemployed.”

In May 2019, BLS said 96.2 million Americans weren’t in the official labor force. As of May 2020, that figure stands at 102.1 million, which is a change of 5.9 million.

This “could explain nearly two-thirds of the 9 million-person gap between those receiving unemployment benefits and those counted as unemployed,” the economist explained.

— Check out CBO: U.S. Economy Won’t Recover Pandemic Losses Until 2030 on ThinkAdvisor.