No one was prepared for a collapse like this. The data are all over the place. Two government agencies differ by 9 million unemployed. The jobs crisis bottomed in May. But “over 30 million” people remain without work. Making sense of the chaos.
By Wolf Richter for WOLF STREET.
Even Fed chairman Jerome Powell, in his FOMC-meeting news conference yesterday, expressed his bafflement with the chaos in the unemployment data being reported by two government agencies that differ by give-or-take 9 million unemployed, which is huge:
- The Department of Labor reported this morning that 29.5 million people were receiving state or federal unemployment insurance benefits (not seasonally adjusted).
- The Bureau of Labor Statistics reported last Friday in a shock-and-awe data set that only 21 million people were unemployed based on household surveys, though it acknowledged a shock-and-awe systematic error and that without this error, it would have reported 25 million as unemployed.
These are huge differences! I believe the main issue isn’t political meddling but that this collapse of the labor market was so massive and so fast with such huge numbers under such extraordinary circumstances, that the normal procedures for tracking unemployment essentially malfunctioned.
This includes seasonal adjustments that went haywire under those conditions, and I have switched to reporting not-seasonally adjusted numbers to dodge those pitfalls.
The Bureau of Labor Statistics, which reported the data last Friday, tracks unemployment via household surveys. It pointed out that those surveys could not be conducted as usual because of the pandemic. Plus, there was chaos over the category of “temporarily unemployed” due to the shutdown. These people should have been counted as “unemployed,” but were misclassified as “absent” from work for “other reasons,” and were not counted as unemployed. As a result, only 21 million people were categorized as unemployed, while according to the BLS, about 25 million people should have been counted as unemployed. You had to read way down into the report to get this.
The Department of Labor reported unemployment insurance claims this morning, based on data submitted by state unemployment offices. These state unemployment offices had a hard time over the past two months catching up with the tsunami of claims that suddenly came out of nowhere.
Then there was the CARES Act, which provided gig workers for the first time with federal unemployment insurance. This Pandemic Unemployment Assistance program (PUA) is administered by the state unemployment offices, but they were not set up to process these PUA claims. Some scrambled to get it done, and others sank into chaos. As of today’s report, about 18 states are still not able to process PUA claims, including Florida.
These PUA claims are already huge: As of today, nearly 10 million gig workers receive benefits under it – one third of total unemployment insurance beneficiaries!
So it boils down to this:
State programs: The Department of Labor reported this morning that 1.537 million new unemployment claims, not seasonally adjusted, were filed under state programs in the week ended June 6. This was down a tad from the new claims in the prior week (1.6 million), but was still over twice the magnitude during the peaks of the prior unemployment crises in 1982 and 2009.
But many people returned to work, as restaurants, bars, retailers and other businesses re-opened. And so the number of people continuing to receive state unemployment insurance ticked down a tad to 18.92 million, not seasonally adjusted (from 19.29 million in the prior week).
Federal programs: the DOL also reported this morning that 705,676 new claims, not seasonally adjusted, were filed under the PUA program in the week ended June 6. But some gig workers got their work back and stopped claiming benefits. And the total number of gig workers continuing to receive unemployment benefits under the PUA program declined to 9.71 million.
There are other federal unemployment programs, including the Pandemic Emergency Unemployment Compensation program (518,942 insured unemployed), Federal Employees (15,269 insured unemployed), and Newly discharged veterans (11,866 insured unemployed).
State & federal combined: In total, 29.5 million people (not seasonally adjusted) continue to receive unemployment insurance under all state and federal programs combined. This is down from 30.17 million last week, indicating that despite a flood of new claims, more people are getting their jobs back than new people enter into the system.
The stacked chart below shows that the surge of the total number of insured unemployed under federal programs (red) and state programs (blue) combined peaked two weeks ago at 31.0 million and ticked down last week and this week, but remained catastrophically high at 29.5 million:
This total of 29.5 million of insured unemployed still understates by some amount the total number of people eligible to receive unemployment insurance because some of the PUA claims have not been processed.
And it understates by some number the total number of people who have lost work because some people who lost work don’t qualify for either state or federal benefits (not long enough on the job, etc.); and while they’re excluded from the claims data and don’t receive UI benefits, they’re still without work.
So there are three points I want to conclude with:
This unemployment crisis appears to have bottomed out in May. While many more people are still losing their jobs, and will continue to lose their jobs, others are being rehired, and the net total in terms of numbers of UI beneficiaries is now declining. This is the second week in a row that we have seen this overall decline.
It’s even worse than it looks. The total number of people who have lost their work – employees and gig workers – and who are still out of work must be above the 29.5 million insured unemployed because many people don’t qualify for any benefits. I don’t know where this final number is, but it is likely well above 30 million.
Until the Bureau of Labor Statistics (Friday’s report) gets its house in order and gets the chaos under control, the least inaccurate reflection of the unemployment crisis is the combined total of continued state and federal UI claims – the 29.5 million – with some number added for people who don’t qualify for either.
So when we say that “over 30 million people” have lost their work and are still out of work, we’re in reasonable territory – and this is at least 10 million unemployed higher than the market-moving shock-and-awe-nonsense from the Bureau of Labor Statistics last Friday.
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