Fear of Covid Keeps the Unemployment Rate Artificially Low

Mish

Around 4 million adults aren’t looking for jobs, not because they’re scarce but because of worries about catching the coronavirus

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.

Mish

Comments (47)
No. 1-10
Eddie_T
Eddie_T

It must be nice to have the option of not working to avoid COVID. At this point, with the vaccines widely available to most age groups, it seems bogus to me that it should be a big deal for most people to go to work. Maybe for choir directors.

PecuniaNonOlet
PecuniaNonOlet

With 500,000 dead in the US and more globally, it should be enough data to make a determination/guesstimation about who is most likely to die from covid. Take blood samples, scan the dna and tell the rest of us who is susceptible from dying.

If people knew that they can act more prudently than living in fear.

Sechel
Sechel

I could see that, especially for people who have a risk factor or are in a very public setting

Eddie_T
Eddie_T

The key is vaccination. Even with the variants you can look at the curve in a place like Israel and see it clearly. We certainly don’t need to let up on our efforts to get everyone vaccinated, and no one should fail to understand that it isn’t merely about them, but about everyone.

This is what good COVID policy gets you.

njbr
njbr

Common courtesy would help, too.

There are too many stories of people working their jobs attacked and villified for asking for patrons mask-wearing, or attacked just because the worker is wearing a mask.

numike
numike
The B117 variant is spreading out from Michigan, driving increased hospitalizations in Illinois, among other midwest states.

Seems just a matter of time until it takes root in the unvaccinated here and causes some significant rises in hospitalizations. Increased vaccination can blunt that, but who knows how much, what with all those who'll refuse the shot.

Michigan is nuts, even with 22% fully vaccinated they're seeing more infections than ever, and might double the holiday peak before the end.

Casual_Observer
Casual_Observer

This recovery is strong, but it's nowhere near as strong as reported or believed.

Who said it was being over-reported as strong or believed ? Most of the front-running goes on by financial outlets like the Street.com.

RonJ
RonJ

"Fear of Getting or Spreading Covid"

Not surprising, considering the non stop fear mongering. Weeks ago, there was a new variant here, the California variant, which was supposed to be more contagious, yet the number of Covid cases has dropped to the point where indoor dining is now allowed in L.A. County.

Apparently the CDC has just now updated its instructions as to dealing with potential surface contact, noting that “In most situations, the risk of infection from touching surfaces is low."

QMRA studies apparently "suggest that the risk of SARS-CoV-2 infection via the fomite transmission route is low, and generally less than 1 in 10,000, which means that each contact with a contaminated surface has less than a 1 in 10,000 chance of causing an infection."

ColoradoAccountant
ColoradoAccountant

You can't get Covid sitting at home grammar checking Mish. Sunday to Saturday is a week, not a weak.

Landofmountains
Landofmountains

Get real, most of these people are still living a social life and not even giving the virus a thought. They aren’t going back to work because they are making too much money on unemployment.


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