There was quite a Friday surprise from the Bureau of Labor Statistics, which said the unemployment rate dropped from 14.7% in April to 13.3% in May.
But economists have called that figure into question for a variety of reasons — not the least of which was a “misclassification error” by the BLS itself.
“There is good reason to be skeptical of [the Trump] administration’s latest report,” said Robert J. Shapiro, chair of the consultancy Sonecon and a fellow at Georgetown University, in a blog post Friday for Washington Monthly.
The BLS said 20.9 million Americans were unemployed in May. It attributed the drop from April to employers generating 2.5 million jobs in May as some states gave the green light for limited economic activity.
“But it’s not that simple,” Shapiro explained.
Behind the Numbers
The jobless rate is determined by the results of a week-long survey of businesses and households; the latest poll took place during the week that ended May 16.
That same week, BLS also reported that nearly 30 million Americans collected unemployment benefits.
“That’s a gap of 8,980,415 people, enough to raise the May jobless rate 5.7 percentage points to 19.0% and much closer to economists’ expectations,” Shapiro explained.
The BLS counted anyone whose employers said they were being paid “even if they were not actually at their jobs,” Shapiro points out.
In addition, the BLS considers furloughed workers to be “unemployed on temporary layoff,” he adds; however, if the BLS expects these individuals to return to their prior jobs, it does not include them in the tally of unemployed workers.
A recent University of Chicago study, though, estimates that 42% of workers furloughed due to the pandemic will not get their jobs back, Shapiro points out. Plus, just 30% of those laid off are expected to get new jobs later in 2019.
“With 30 million people receiving unemployment benefits, that analysis is more consistent with unemployment at 19.0% today than 13.3%,” explained the former Under Secretary of Commerce.
Continuing Jobless Claims
According to JPMorgan Chief Global Strategist David Kelly, “the measured unemployment rate still likely sharply underestimates the true unemployment rate (as it did in April).”