May unemployment figures not all that "rosy"

What happened to all those confident predictions that the unemployment rate would rise to 20 percent or more? The unemployment rate actually decreased 1.4 percent to 13.3 percent in May. But Donald Trump shouldn’t be taking a “victory” lap just now; the economy will certainly improve over the coming months, but one should give pause to the possibility that some employers will take the opportunity to find reasons to reduce their payrolls, and simply tell some workers that they can be done without.  

Let’s take a look at what the Bureau of Labor Statistics tell us. The number of people “officially” looking for work in February was 164.5 million, while the number of unemployed was 5.8 million. In April, those numbers dropped to 156.5 million actively seeking work, and 23.1 million unemployed. What does that tell us? That more than 8 million previously employed person had dropped off the actively seeking employment rolls. If they had been counted in the unemployment figures, the unemployment rate would have been 19 percent. 

In May the number of people seeking employment rose to 158.2 million, and the number of unemployed dropped to 21 million. However, the country is still more than 6 million below previous highs in total number of people actively seeking employment; if those numbers were included, the unemployment rate for May would still be 16.4 percent—actually higher than the “official” unemployment rate for April. The May Labor Department report even suggests worse numbers; it claims that there are actually 9 million people who want work but are not currently actively seeking work, which would mean an “unofficial” unemployment rate of close to 18 percent in May. 

Of course those numbers don’t even provide the most accurate picture of the labor market, since according to a 2018 Labor Department report, the number of people “participating” in the labor market—meaning all persons who have been in and out of the labor force, not including those who are incarcerated and prevented from seeking work, has seen continuous decline over the past few decades. The report notes that “a decline in the unemployment rate, instead of reflecting better economic conditions, could reflect a decline in the participation rate if long-term unemployed workers drop out of the labor force.” It shows that unlike other western countries, the U.S. has seen increases in the number of the “actively” nonparticipating by both non-degree and degree workers—the latter particularly interesting given the influx of H-1B visa workers. 
 

The May employment report also notes that 40 percent of the increase in employment over April numbers occurred in part-time jobs. Other items of note is that Hispanics have the highest unemployment rate of working adults, at 17.6 percent—actually a “decrease” over April’s numbers. Permanent job losses increased by nearly 300,000 in May, bringing the total to 2.3 million, which suggests that even when things get back to “normal,” the unemployment rate will not reach pre-COVID-19 lows for the foreseeable future. The number of unemployed for 5-14 weeks nearly doubled, and the long-term unemployed increased slightly. Persons who wanted full-time work but settled for part-time work increased by 60 percent since February. State and local government jobs—which include school teaching positions—continued to see job losses, as did information, mining, warehouse and transportation jobs. Average hourly wages decreased by 29 cents in May, supposedly due to more lower-wage workers returning to the work force; although there was a significant increase in the average rate in April, this was due exclusively to significant job losses in lower-wage jobs while many higher-wage workers remained on the payroll, working “remotely” which lower-wage workers generally could not do. 

While we will certainly see improvement in the employment figures so long as there isn’t a major recurrence of the COVID-19, the virus’ true effects on the economy has yet to be seen, as some businesses may never return, and larger businesses deciding they can do with less.