A Couple of Key Data Points to Better Understand the Current Depth of Unemployment

The unemployment rate in the U.S. was recently reported to be at 14.7% in April. Here is a link to the full report released by the U.S. Bureau of Labor Statistics. It is somewhat lengthy, but as always, it is worth a quick look, especially since this report contains some insightful information beyond the headline unemployment rate.

One insight is the difficulty in being able to correctly capture the data due to the unique situation caused by the pandemic. This is highlighted in the following statement from the report.

However, there was also a large increase in the number of workers who were classified as employed but absent from work. As was the case in March, special instructions sent to household survey interviewers called for all employed persons absent from work due to coronavirus-related business closures to be classified as unemployed on temporary layoff. However, it is apparent that not all such workers were so classified.

If the workers who were recorded as employed but absent from work due to “other reasons” (over and above the number absent for other reasons in a typical April) had been classified as unemployed on temporary layoff, the overall unemployment rate would have been almost 5 percentage points higher than reported (on a not seasonally adjusted basis). However, according to usual practice, the data from the household survey are accepted as recorded. To maintain data integrity, no ad hoc actions are taken to reclassify survey responses (pp. 5-6).

As noted in the statement, they calculate that the unemployment rate would have been close to 20% if this data was accurately reported.

A second data point of note is that when those who are marginally attached to the labor force and the total employed part time for economic reasons are considered, the unemployment rate (technically referred to as U-6), was 22.8% in April (see Table A-15 in the report).

I hate to highlight more bad news, as if 14.7% of the labor force being unemployed was not bad enough, but in order to really understand the depth of the economic recession we are in, I think it is important to consider these figures.

Some definitions: Those marginally attached to the labor force include people who are not currently looking for a job but have indicated they would like to work and have looked for a job in the past 12 months. This also includes discouraged workers who have become discouraged about their prospects of finding a job and have dropped out of the labor force. Those employed part time for economic reasons are the workers who would like to work full time but can only find part time work.

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Unemployment Rate in San Antonio at Its Floor

The unemployment rate in San Antonio in July was at a seasonally adjusted rate of 3.2%. Since May 2017, it has been in the range of 3.1-3.5% each month. This is about as low as the unemployment rate has ever been in San Antonio since January 1990, as far back as the data goes. The lowest it ever got was in March and May 1999 when it reached 2.9% in each of those months.

As shown in the graph, for about the past year, the unemployment rate has been near the level it was during the dot come bubble leading into the recession in 2000 and about one-half to almost a full percentage point lower than the unemployment rate during the housing bubble preceding the Great Recession.

It seems to me that the San Antonio economy has been at its full-employment level of unemployment, so it is most likely the unemployment rate will only be going up over the next year or so. It may continue to hover in the aforementioned range for several months, but it appears to have hit its floor.

 

Unemployment SA July 2018

 

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