The US jobs report has been released, and contains largely positive news. In October, the unemployment rate declined by 1.0 percentage point to 6.9 percent, and
the number of unemployed persons fell by 1.5 million to 11.1 million. Both measures have declined for 6 consecutive months but are nearly twice their February levels.
This is stronger than was expected - economists surveyed by Dow Jones had forecast 530,000 and 7.7% respectively. However, the gains are far from returning the US to pre-pandemic levels. According to the Washington Post, the U.S. would need another 16 months of gains at the current level to return to the February employment level.
A hiring slowdown has raised the prospect of a prolonged slump that extends unemployment for the jobless. Many temporary layoffs are becoming permanent as hotels, restaurants, airlines, retailers, entertainment venues and other employers anticipate a longer downturn than initially expected. The resurgence of the virus would compound that threat, especially as colder weather sets in and keeps more people indoors.
A rising proportion of jobless Americans now describe their unemployment as permanent. Conversely, the proportion who say they are only temporarily laid off has tumbled from 80% in April to 40%. Millions of people have stopped looking for work, artificially lowering the unemployment rate. (People who are no longer actively seeking a job aren't counted as unemployed).
Research by Stephanie Aaronson and Wendy Edelberg, fellows at the Brookings Institution, found that 65% of Americans who were temporarily laid off in the spring were back at work by September. But just 40% of workers whose jobs had been eliminated were able to find other jobs.
Positive Numbers, With an Asterisk
The BLS continues forward with a controversial formula, which has at times ignored millions of unemployed workers. The DOL acknowledged this in the April jobs report:
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.
I've been looking at BLS data for years. When they make a mistake they just note it and update it. Here they made an error in March, knew about it and still kept the error in April's numbers, and then didn't disclose until investigatory reporters asked why there was such a gap between 40 million unemployment claims and their 21 million number.
Facing pressure, the DOL has attempted to adjust their collection methodology. Their estimate is that the October unemployment number is closer to 7.2%, and acknowledge that the system continues to be a bit off:
BLS and Census Bureau analyses of the underlying data suggest there still may be some workers affected by the pandemic who should have been classified as unemployed on temporary layoff. However, the share of responses that may have been misclassified was highest in the early months of the pandemic and has been considerably lower in recent months.
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