The Department of Labor announced Friday that with a “limited resumption of economic activity,” 13.3 percent of Americans were unemployed in May. Though still high by historical standards, that’s down from 14.7 percent in April, and a pleasant surprise to many economists, who were expecting a figure closer to 20 percent.
But this statistic doesn’t tell the whole unemployment story. That is true even in ordinary times, and more so in view of the pandemic’s effect on the labor market, which has made this figure particularly incomplete as a measure of economic hardship.
“The unemployment rate itself is significantly going to understate the drop in economic activity,” said Stephanie Aaronson, the director of economic studies at the Brookings Institution. “It also is underestimating the amount of distress that Americans are facing right now because it understates how many people have lost jobs.”
Here’s what the unemployment rate would look like if it were expanded to include more workers who have been hurt during the pandemic.
The headline unemployment rate is calculated by taking the number of unemployed adults divided by the total number of people in the labor force, employed and unemployed. (The rate shown here is not seasonally adjusted, which is why it’s slightly different from the headline Labor Department number.)
This rate includes 15 million workers who expect to be recalled back to their jobs, as well as those on permanent layoff, job leavers, new entrants and re-entrants to the labor force.
But there are millions of people who are not working and want a job that this rate leaves out. To be officially counted as unemployed, workers who are not on temporary layoff must indicate that they have looked for work in the past four weeks.
The Department of Labor releases an expanded unemployment rate called the U-6 that captures some of these workers, those considered “marginally attached” to the labor force because they have looked for a job in the past year. If we add those workers to our expanded unemployment rate, it increases to 14.2 percent.
But the pandemic is causing many people not to look for work because of fears about getting sick or responsibilities like caring for children. If we include all those people who say they want a job, regardless of their job hunt status, the rate increases to 17.9 percent.
Bankruptcies declared by businesses in the U.S. rose nearly 50 percent in May, as the economy continues to feel the sting of the coronavirus pandemic.
In May alone, 722 businesses across the country filed for chapter 11 bankruptcy, according to legal-services firm Epiq Global, The Wall Street Journal says. That’s up 48 percent from May 2019, when 487 businesses filed for chapter 11.
Since March and the onset of the pandemic, the U.S. economy has taken a nosedive, shedding over 40 million jobs and ballooning the country’s unemployment rate.
Some good news came Friday morning, when the Bureau of Labor Statistics announced in a huge surprise that the economy added jobs in May and that the unemployment rate fell.
Congress has passed multiple coronavirus stimulus packages cumulating in trillions of dollars, but many industries such as service and airlines are still struggling to regain their footing.
“Hotels are not going to bounce back quickly. You’re going to see a long-term effect on office space,” Deborah Williamson, a San Antonio bankruptcy lawyer, told the Journal. “The consequence of the quarantine around the world…It’s not going to magically go away as you reopen.”