Fear of Covid Keeps the Unemployment Rate Artificially Low
Fear of Getting or Spreading Covid
Officially the Unemployment rate is 6.0%. Practically speaking, it is much larger by several methods.
Please consider The Other Reason the Labor Force Is Shrunken: Fear of Covid-19.
A U.S. Census survey conducted in the second half of March found that about 4.2 million adults aren’t working because they are afraid of getting or spreading the coronavirus.
Labor-force participation usually falls in recessions, as some people give up job hunting. But such discouraged workers accounted for just 3% of last year’s decline in workforce numbers, according to Labor Department data. This suggests that fear of the coronavirus might explain a lot of the remainder.
A handful of studies, including one by Austan Goolsbee and Chad Syverson of the University of Chicago, have used cellphone location data to track individuals’ travel patterns and found that voluntary behavior changes during the spring of 2020 drove the collapse in mobility more so than government-mandated shutdown orders did.
The precise effect of fear on the labor market isn’t clear because it isn’t something the government tracks. The Labor Department’s monthly jobs survey in March found that the pandemic had prevented 3.7 million people from looking for a job in the prior four weeks, but didn’t specify the reason.
The Labor Department survey results and the 4.2 million number cited by the Census survey aren’t directly comparable because of differences in questions asked, but both suggest that wariness about catching Covid-19 explains a substantial portion of the labor-force decline.
Unemployment Rate Calculation
The Unemployment rate is the number of people who are unemployed divided by the labor force.
UR = (#Unemployed / Labor Force) * 100
We can easily calculate a "what if" rate by adding 4.2 million to the labor force and the number of unemployed.
Every month I post the jobs report and details needed for the calculation. In April I noted Economy Adds Over 900,000 Jobs Beating the Consensus By a Mile
BLS Jobs Statistics at a Glance
- Nonfarm Payroll: +916,000 to 144,120,000 - Establishment Survey
- Employment: +609,000 to 150,848,000- Household Survey
- Unemployment: -262,000 to 9,710,000- Household Survey
- Baseline Unemployment Rate: -0.2 to 6.0% - Household Survey
- U-6 unemployment: -0.4 to 10.7% - Household Survey
- Civilian Non-institutional Population: +85,000 to 261,003,000
- Civilian Labor Force: +347,000 to 160,558,000 - Household Survey
- Not in Labor Force: -263,000 to 100,445,000 - Household Survey
- Participation Rate: +0.1 to 61.5% - Household Survey
If we add 4.2 million to the number of unemployed and also to the labor force we can calculate a far better number than the 6.0% as claimed by the BLS.
Unemployment Rate = ((9.71 Million + 4.2 million) / (160.558 million + 4.2 million)) * 100
Unemployment Rate = 8.4%
Powell Says the True Unemployment Rate is Actually 10%
In January the official unemployment rate was 6.3%. I commented, Fed Chair Powell Says the True Unemployment Rate is Actually 10%.
I was asked by an economist how the Fed made that determination and posted the method here: How Did the Fed Conclude the Real Unemployment Rate Was 10% in January?
It's Been One Heck of a Recovery in Low-Paying Zoomer Jobs
I also played a set of "What If" scenarios in It's Been One Heck of a Recovery in Low-Paying Zoomer Jobs
For a look at Employment Population Ratios by age Group, please see Employment Trends Show Gen Z, Zoomers were the Hardest Hit Group By Covid
This recovery has been strong, but it's nowhere near as strong as reported or believed.