With each passing week the grim stats add up. But it also makes it easier to estimate the unemployment rate for April.
Let’s crunch the numbers starting with totals from the March Jobs Report and today’s report Over 26 Million Unemployment Claims Filed in Just 5 Weeks.
Household Survey Numbers
Unemployment Rate Calculations
The unemployment rate does not come from caims. Rather, it comes from a phone survey in the week that contains the 12th of the month. That makes the current reference period April 12-18.
The March unemployment rate of 4.4% was wildly low (and will later be revised), because the reference week was before the mass layoff started. That will not be the case in April.
Estimate of Claims to Come
Over 26 million people filed a claim. But the important number is how many qualify who did not file.
Those people will turn up in the Household survey whether they filed or not. I estimate that count at 4 million.
Estimate of the Unemployment Rate
If we assume claims approximate Household Survey answers and further assume my estimate 4 million more qualify, we can estimate the unemployment rate as follows:
(New Claims + Existing Unemployed + Estimate of Claims to Come) / Labor Force
26.453 million + 7.140 million + 4.00 million / 162.913 = 23.1%
That is higher than my 18% Unemployment Estimate a Week Ago. Why?
- Last week I accidentally plugged in the “change” in unemployment of 1.353 million, not the existing unemployed at 7.120 million (undercounting by 5.767 million).
- We have another week of claims and my current total + new guess of claims to come is higher than last week. This is a net difference of about 3 million.
Prior to last week my estimates based on claims have been in the 21-24% range and here we are again.
Michigan Unemployment Rate
Michigan has been swamped with claims. Over a million people have filed for unemployment claims, out of a labor force of under 5 million.
A recent number crunch on Michigan yields an unemployment rate of 24%-29%, truly a disaster.
For details, please see Over 25% of Michigan Workforce Filed For Unemployment.
Caveats
- Just because people filed and unemployment claim does not mean they qualify according to BLS Household Survey guidelines.
- The reverse also holds true. People may qualify for unemployment without filing. Gig workers in particular fall into this category.
- Decline in Labor Force
- BLS uncertainties
- Covid-19 Relief Act
The BLS FAQ on the Impact of the Coronavirus Pandemic on the
Employment Situation for March 2020 covers point #3.
Households are in the survey’s sample for a total of 8 months, meaning that interviewers attempt to
interview someone in the household each of those 8 months. Generally, households entering the sample for their first month are interviewed through a personal visit, and households in their fifth month also often receive a personal visit. Interviews for other months are generally conducted by telephone.For the safety of both interviewers and respondents, the Census Bureau suspended in-person interviews
on March 20, 2020. Additionally, the two Census Bureau call centers that assist with telephone interviewing were closed. The response rate for the household survey was 73 percent in March 2020, about 10 percentage points lower than in preceding months.Response rates for households normally more likely to be interviewed in person were particularly low [20% lower].
Covid-19 Relief Act
Please consider the Increased Unemployment Benefits Under the CARES Act (COVID-19 Relief Act).
Generally, if you take a leave or a reduction in hours as a result of the downturn, you will be eligible for Unemployment Insurance benefits. However, the scale and scope of these benefits will vary depending on the state where you are based.
The important points above concern a “reduction in hours” and the state-to-state variance.
Remember, in the Household Survey if you work as little as 1 hour you are not unemployed.
Potential Unemployment Overcounts in My Calculation
- Those furloughed but still getting paid are counted as employed, whether they filed a claim or not.
- People filing on the basis of reduced hours as per state law.
Potential Unemployment Undercounts in My Calculation
- People who worked no hours but did not file
- People not picked up in the BLS Household Survey who qualify.
I suspect we have more overcounts from people wanting free money than undercounts of people eligible but I do not know.
Let’s crunch the number one more time assuming 6 million overcounts.
Factoring in 6 Million Net Overcounts
(New Claims + Existing Unemployed + Estimate of Claims to Come – Overcounts) / Labor Force
26.453 million + 7.140 million + 4.00 million – 6.00 million / 162.913 = 19.4%
Decline in Labor Force
I held the Labor Force constant. It won’t be. Some people will retire.
The labor force fell by 1.633 million in March to 162.913 million. What if it fell by another 4 million.
26.453 million + 7.140 million + 4.00 million – 6.00 million / 158.913 = 19.9%
26.453 million + 7.140 million + 4.00 million / 158.913 = 23.6%
Synopsis Range
- If one assumes a 6 million overcount of claims vs what the household survey shows the estimated unemployment rate is 19.4% to 19.9%
- If one assumes no overcount the range is 23.1% to 23.6%
- If there is an undercount the rate may top 25%
My comfort range is 17-25% with an expectation of 20-24%
If the rate is way lower, then watch the increase in U-6 unemployment which counts all those working “part-time for economic reasons“, even as little as 1 hour.
A U-6 rate well into the 30% range is likely in any case.
What’s Next?
On March 23, I wrote Nothing is Working Now: What’s Next for America?
I noted 20 “What’s Next?” things.
Covid-19 Recession Will Be Deeper Than the Great Financial Crisis
On April 1, I commented, the Covid-19 Recession Will Be Deeper Than the Great Financial Crisis. Do not expect a V-shaped recovery.
Forever Changed
- More teleconferencing and fewer corporate lunches
- Less air travel, hotels, and car rentals at the personal and business level
- More work at home
- More do-it-yourself haircuts, nails, lawns, etc.
- Fewer car purchases
- Fewer home purchases
- Accelerated online shopping and more mall closures
The knock on impacts of all of those means more bankruptcies and less employment..
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Mish
Hi Mish, thanks for giving this a shot. I have a caveat for you, though. If you look at the March report, the labor force dropped by 1,633 while unemployment rose by 1,353. The same thing will happen with the April report except my an order of magnitude greater. The reason is that a lot of the unemployed will have lost their job permanently but won’t be able to do a job search due the the economic shutdown. That means that they will be out of the labor force rather than unemployed. Just as in March, the labor force decline will likely be larger than the unemployment increase.
Will antibody tests for the coronavirus really change everything?
Touted as society’s way out of widespread lockdowns, scientists say the true potential of these rapidly developed tests is still unknown. https://www.nature.com/articles/d41586-020-01115-z
That’s the best article I’ve seen for giving a comprehensive picture of the state of current antibody tests (not yet good enough for the Stanford and LA and other CA tests to mean much of anything) and describing the shortcomings of tests with even much higher sensitivity and specificity ratings that preclude them from being the “magic sliver billet” that some are hyping them to be. More accurate tests will provide much more accurate information than the tests are providing today but will still leave some key questions unanswered.
In the week when Trump told Americans to think about injecting bleach & shining light through their bodies to cure a virus, I would like to revisit Trump’s comments from 2016 claiming Hillary Clinton had a degenerative brain disease.
When the economy finally begins a recovery, who will win the race for the unemployed?
New jobs vs drop in participation rate?
…no major investor, really will lose. You’ve seen last week, the stock market made the largest jump since the depression — the largest jump in in 90 years.
… while the economy is going down, you realize, wait a minute they’re saving the 1 percent, or the 10 percent of the population that own 85 percent of the stocks and bonds. They’re saving the banks. They’re not saving the people, and they’re not saving the economy; they’re not saving industry; and they’re not saving small businesses.
…the bailout really is an Obama-style bailout. It goes to the banks; it goes to those companies that have drawn up wish lists by their lobbyists, such as the airlines, Boeing and the large banks.
“…no major investor, really will lose.”
…
Still too early to tell.
But put me in the fundamentals / gravity win in the end camp.
“Obama style bailout”…..is that really fair? Is what happened really what Democrats wanted, or what they could get Republicans to agree to? Just look at what’s happening now. What do the Democrats want, and what can they get the Republicans to accept?
They both want the same thing: Bail out their campaign contributors. It’s not like the two parties differ fundamentally in anything but name, after all. They both exist solely to rob competent, productive people for the benefit of incompetent, connected leeches.
All bailouts are the same. There aren’t “good” ones vs “bad” ones. That is all theater and obfuscation. So, since all of them are the same, they are all Obama style bailouts. And Reagan style ones. And FDR ones. They’re bailouts of the connected, by the productive. At the point of governments’ guns.
I still get a quick and dirty ± 24% using the https://www.usdebtclock.org/# actual unemployed divided by the total labor force which is about 30 million less than Mish’s 162 million?, Haven’t bounced things off of the BLS site but the results are close to Mish’s and John Williams over at Shadowstats. Debt to GDP @ ± 130% and tax revenues in deep reversal = not a good scenario. We need a massive reboot of the CCC program imho!!
I heard some workers are balking at ‘work’ since they make $2,400 a month on unemployment
guess its PROFITABLE to not work
Those chicken littles who want the economy in shackles because of their fear of second wave can stay home curled up in the fetal position and ask their mommy to suckle them. Most of these chicken littles snowflakes I would bet are libtards wanting to remain parasites, There will be second waves, no doubt. If appropriate precautions are undertaken it will be minimal. I believe a vaccine and or treatment will come about sooner than later. The studies in Sweden show that about 1/3 of their population has been infected and now their mortaltiy rates are calculated at .5% for now. It may of been lower had they encouraged mask wearing and social distancing. As far as UE goes many people are getting more by not working and will fight kicking and screaming if called back to work. WTF. I don’t know that if their employer reports their refusal the UE benefits should stop. In theory it should but who knows. The govt, Tumps, response has been overkill on helicopter money. The financial dislocations brought about by the govt saying its okay not to pay your mortgages will have far reaching reverberations. People who can pay via their stimulus checks and lavish UE will not pay even if they can. Good luck trying to dig out of this clusterfuck.
The sooner we reopen the economy and make people go back to work the better.
” It may of been lower had they encouraged mask wearing and social distancing. “
No, for IFR it is just a ratio, no matter the number infected.
Slowing infections might make IFR less, because of preparedness for example. It might make IFR higher even, because say lack of resistance to a more dangerous strain.
Point is the data and reliability of the metrics are all over the place.
In Sweden, and elsewhere, early proper lockdown of old people’s homes and those compromised, would have reduced IFR to well under 0.5%.
They didn’t do something that simple, and it is a simple thing to do compared with what is going on now.
These people, they know how to create deadly transmissible virus to save people, but they don’t know how to shut a door.
They know how to support you while displaying to you a miserable panorama of suffering, but they won’t allow you to return to your own ways if you are not convinced by their show.
There won’t be a return to previous normality, not for those for whom it was not so good, not for those who were working to make it better.
There will be a barrier to reconstruction of economy and society, and that reconstruction will be managed from beyond the control of any normal person.
All we have to do is say “Thank you.”
“The sooner we reopen the economy and make people go back to work the better.”
…
I agree economy needs to open, but Kudlow’s proposal to give business immunity from lawsuits from employees / customers if they contract virus at work site needs to be rethought. Immunity OK IF some sort of protection given. Otherwise, business will exploit … as always.
No one anywhere “wants” the economy in shackles. I am tired of this kind of shit. Knock it off.
Well, I know of a couple teenagers right now making “great” money on unemployment who are A-OK with a prolonged shackled economy 🙂 (I hope they’re saving most of it though).
Those PPP loans may come a cropper due to the paid sick leave and family leave provisions Congress inserted in them. Millions of small businesses just can’t afford to provide such benefits so they will either close or layoff more workers.
I’m also concerned about supply chain disruptions. I mentioned a story about an auto parts manufacturer in Michigan whose workers won’t come back as they are making more on unemployment and not having to risk their health working on the factory floor. The auto plants want to reopen but if they can’t get parts the won’t be able to. Something as simple as a radio dial knob or door latch if missing can shut down a multibillion dollar auto assembly line.
This is just the beginning of the virus infections.
If 20 million Americans were infected every month it would take at least 12 months to get though this. 70% infected
20,000,000 x 10% hospitalization 2,000,000 beds a month
20,000,000 x .5% IFR 100k month or 3k daily
That’s for a year.
How will the job market look in a year? What about the housing market? Stock market? Colleges? State taxes? US deficit?
I don’t think anyone on the blog can imagine the shear pain in front of us. That includes myself.
The R0 at the moment suggest this could drag on for years.
“It became necessary to destroy the town to save it.” — possibly Maj. Phil Cannella, US Army, Vietnam 1968
Or America 2020.
“History doesn’t repeat itself, but it rhymes.” — possibly Mark Twain
Which is why at some point you have to face the problem head on and legislate on “humane” ways to sedate and peacefully let go of those who couldn’t get access to the overflowing medical system. There’s no other way, and yes that could mean you or I. You’ll see people washing their hands every 5 minutes if they knew they could end up in the parking lot of a hospital, on the sedation list.
And add in the WHO saying they don’t know if immunity is possible.
Surprised there were even 26.5 million jobs that were viable enough to get UI.
Well, they were all expendable too.
Accessing Michigan.gov on line to file for unemployment benefits:
Voters are pressuring politicians to re-open non-essential businesses. When some people get their jobs back, they will no longer receive unemployment insurance (UI) checks. To be eligible for UI in the future, it can take 12 to 15 months of employment. With an expected second virus peak in less than 9 months, many will lose their jobs a second time, and then be ineligible for UI. They will be worse off for trying to get non-essential businesses reopened. Be careful what you ask for; you might just get it.
These “protesters/voters” number in the hundreds everytime there’s a demo. Totally laughable
It will be over in a matter of days! Dear Leader has a solution: disinfectant injections!
Cue the circus music.
Only his supporters will do that. The world might actually improve!!!
I think we will see some sort of infrastructure play as soon as the summer. That should turn employment and oil around some, but yeah, some businesses are toast forever.
America will need a war soon just like WW II.
Coincidentally, so will China…
Trump is working on that. Tweeting about shooting up Iranian fast boats.
Finally, something in common between Trump and the Iranian leaders. No doubt the later too are hurting because of the oil price drop.
“If goods don’t cross borders, armies will.” — misattributed to Frederic Bastiat