Key Unemployment Rate Determinants
- The number of state continued claims in the BLS reference week.
- Labor force changes (retirees, other dropouts, new employment)
The BLS reference week is the week that contains the 13th of the month.
Continued Claims
BLS Reference Week Comparison
- 14,535,000 for August
- 16,951,000 for July
That is a decrease in unemployment of 2,416,000
Jobs Report vs Continued Claims
The 5 million difference in the April Jobs report is due to the huge number of gig workers unable to file state claims at the onset of Covid.
I suspect august will be more like July. If so, it will reduce the unemployment rate.
July Jobs Report Household Data
Note that the number of unemployed nearly matches the previous reference week of 16,951,000. The data is constantly adjusted so it will not match exactly.
Unemployment Rate Calculation
The Unemployment Rate is the Number of Unemployed Divided by the Labor Force.
The number of employed is not a direct input.
What If?
If the labor force remains the same but the number of unemployed decreases by 2,416,000 to the number of continued claims, we can estimate the next unemployment rate as follows:
Rate = 14,535,000 / 159,870,000 * 100 = 9.1%
That’s my estimate for Friday.
If we subtract in 613,000 as happened in July, the calculation is as follows:
Rate = (14,535,000 – 613,000) / 159,870,000 * 100 = 8.7%.
If the 630,000 discrepancy goes the other way the unemployment rate would be 9.5%.
Bloomberg Estimate
The Bloomberg article U.S. Jobless Rate Set to Return to Single Digits is what inspired this article.
Employers probably added 1.4 million workers to payrolls, not far from July’s result of 1.76 million, according to a Bloomberg survey ahead of Friday’s Labor Department report, which covers the period through mid-August. Economists see the jobless rate at 9.8%, almost triple its level before the pandemic.
The headline payrolls number is likely to reflect a boost from about 238,000 temporary workers hired to conduct the decennial U.S. census. While the overall gains reflect additional business reopenings and an ebbing of Covid-19 cases, the economy remains fragile with the disease untamed.
Weekly jobless-claims figures due Thursday will give a more current sense of the state of the labor market following a report that showed improvement with some caveats.
Jobs Matter Little
An increase in employment actually matters little unless the number of unemployed drops the same.
It’s the labor force and unemployed that are the key determinants.
In July , despite an employment increase of 1,350,000 the labor force shrunk by 62,000. It was the decline in unemployment, not increase the increase in employment that mattered.
A rising labor force lowers the unemployment rate but not nearly as much as falling unemployment.
Jobs vs Unemployment
The headline boost in jobs of 238,000 temporary census workers is essentially meaningless to the unemployment rate but important to the jobs report.
Previous Calculation
For June, there were continued claims of 16,951,000. If we divided that by the May Labor Force (assuming it would not change as we did for this month) we would have guessed an unemployment rate of 16,951,000 / 158,227,000 = 10.7% vs the reported 11.1%.
The 10.7% rate was due to the reported unemployment of 16,338,000 vs claims of 16,951,000.
Take the Under
The Bloomberg consensus Unemployment Rate is 9.8%.
I will go with 9.1% based on my calculation.
Realistically, however, the number of unemployed should be greater than the number of continued claims, and arguably far more due to gig workers unable to file claims at the state level.
Realistically Speaking
A more realistic estimate of the actual unemployment rate would be 18%-20% not 10%.
My 9.1% estimate is what I expect the BLS will report, not actual conditions.
Related Articles
- Aug 27: Unemployment Claims are Still Extremely Elevated
- Aug 28: Devastating Consumer Financial Cliff Coming Right Up
- Aug 29: Permanent Layoffs Soar, and It Will Get Worse
Due to points 2 and 3, the August Jobs report may be as good as it gets for some time.
Mish
It is a really impressive post. US Employment rate is increased from 57.40 to 57.50 which is seriously considered for further steps. All the US customers have a better chance to get a gift card of $500 for Wendys customer feedback survey https://takecustomersurvey.com/talktowendys/
It is a really impressive post. US Employment rate is increased from 57.40 to 57.50 which is seriously considered for further steps. Covid-19 affected many businesses and employees life style.
The US unemployment rate dropped to 10.2 percent in July of 2020 from 11.1 percent in June and below market expectations of 10.5 percent, as many businesses continued to reopen and rehire employees following COVID-19 lockdowns https://www.myprepaidcenter.page/
You know what’s not boring? Trump supporter murdered in Portland last night by far-left rioter, after three months of far-left rioting, arson, attacks on officers, hospitalization of a bystander last week, all thanks to mayor and governor — and the mayor and governor both blame Trump. That’s some world-class deflection right there.
Oregon used to be an all-white state. Per 2019 census estimates, the state remained at 87% white, which includes Hispanics (75% pure white w/o Hispanics). The black population of the state is only 2%.
And yet, the Portland metro area is listed as 27% “people of color”.
So why is Portland in such an uproar over BLM in a state/region that is predominately white? Is this white guilt? Or what?
” Is this white guilt?”
Less “guilt”, than having been raised/indoctrinated to believe that “The sixties, man! Woodstock, pot, the Civil Rights Movement….. Man, back when we were young!” were anything other than just another boring decade in the continuing wave of decay and decline into a totalitarian hellhole which had began in earnest a century prior.
If Black Lives Mattered to Portlanders, Portlanders would get out of the way and let developers build housing more black people could afford in the nicer, white but of course, neighborhoods of Portland. Which they, just as of course, don’t nor wont. As always, it’s easier to pretend they are being nice to their niggas by childish posturing and look-at-me tentrums, with zero (at best) real effect.
Well I doubt it would have happen had Trump not escalated the situation with federal military being sent to Portland. It also would not have happen if police would stop shooting black people on sight or choking them to death.
Oops on your part! More whites than blacks get shot and killed by police.
Number of people shot to death by the police in the United States from 2017 to 2020, by race
And most of the people who get shot by cops are holding guns.
Yes it is funny that Oregon is so white but a hot spot for these protests. When we’ve had friends from the east coast over, they’ve seen the “Black Lives Matter” signs in store windows and been confused — what are all of these white people who don’t even know any black people talking about? I think it’s virtue signaling and the worship of victimhood.
There are pockets of diversity in Portland. My kids’ high school is very diverse. They have black friends, and don’t seem to care about color at all. It’s the adults who are obsessed with race here.
From what I saw in Portland most young white people are not that well off. Portland isnt Marin county or San Diego.
Not per capita. Poor analysis.
I find it sad-funny that people assume these antifa “protestors” have a thoughtful position or are making some sort of logical response. I’ve watched lots of video of them, my take is they are extremely immature, uncivil, and stupid. I mean IQ 85 stupid. No logical human tries to provoke the police, night after night, for any reason, let alone thinking it will reflect poorly on the police.
The larger circle of dems and BLM protestors who go home each night to their overpriced craftsman houses before the mayhem starts are not stupid, they’re just progressives with progressives’ beliefs. They look the other way about the rioting, because they know who must REALLY be evil: successful white men.
Unemployment is so booooooooooooooring on a Sunday evening. Here’s something more interesting. [lol]
Young people don’t trust anyone who uses this punctuation mark
August 24, 2020
Periods may be coming to a full stop.
Periods are boring; semicolons are where it’s at.
Don’t trigger me with semicolons!
I think you’re right – take the under. Another factor favoring employment growth is that with the $600/week bonus gone, people have an incentive to apply for jobs.
Kamala will not sell out the country to Wall Street and the MIC the way Obama and Trump did.She has learned from Obama and Chump’s catastrophic reign of incompetence,because if she hasn’t ,well lets just say it really won’t matter!
shhhh while you were not looking: Trump Has Now Moved $2.3 Million Of Campaign-Donor Money Into His Private Business
That’s all they found? I suspect it is probably a lot more.
Probably preparing for an exit. One could hope.
One could argue BLS and the report are setup for a huge fall in U-3 because of their counting. Did Trump tell them to stop counting ? I see stocks declining big time once traders get back after labor day weekend. U-6 is a better indicator. The Fed is still dropping money as it needs to. Layoffs will become permanent now that the temporary furlough period is ending for many companies. The party is over and you will not be able to survive as the economy finds new equilibrium. Everyone is extending and pretending. I spoke to hedge fund owner today and he said the real fall is coming in January when banks will be required to report loan losses.
“Due to points 2 and 3, the August Jobs report may be as good as it gets for some time.”
…
I think it will be decent, too … and likely high water mark for rest of year.
THIS report is what Congress has been waiting for … an OK report will support Republican position on next stimulus.
I imagine a fair number of small businesses have been hanging on by their fingernails hoping for a reload of PPP. If stimulus not as generous, expect a lot of towels thrown in.
You are working with rigged numbers. According to the BLS, you are fully employed if you work for one hour. The BLS doesn’t count those who have given up looking which, if I remember correctly, was 100 million–and that was before the pandemic. And there are still plenty of workers who haven’t even collected unemployment yet because the states are overwhelmed. Meanwhile ShadowStats estimates the unemployment rate is actually 30%.
Is “bad”. Going to stay bad for awhile.