Anderson Economic Group Economists Estimate Adjusted Unemployment Rate at 16.3% in May

Unemployment and the Pandemic

Anderson Economic Group economists have focused on the coronavirus pandemic and the related business and government actions since February of this year. In March, we identified the huge impact of both state executive order restrictions and decisions to restrict travel, cancel events, and close businesses as likely to cause 100 million Americans to lose income in April, with many losing their jobs. Those earlier analyses can be found here.

Unemployment in May 2020

Some states—notably Michigan—reached Depression level unemployment in April. The BLS estimate of unemployment in Michigan for April was 22%, consistent with our projection in March and with numerous other indicators. For the country overall, the BLS reported a much lower unemployment rate of 13%.

Most economists anticipated the May unemployment rate in the U.S. would reach, or even top, 20%. The actual data indicated significantly less employment loss, and the BLS estimate for the U.S. unemployment rate was released at 13.3%—a decline from the over 14% recorded in April.

According to AEG’s principal and CEO Patrick Anderson, “Many states began Depression-level unemployment in April, and that clearly continued into May. The new data shows that employers have tried much harder to hold on to their workers than many feared, but cannot hide the staggering job losses that continue.”

We note that the BLS observed at least two significant irregularities in the collection and calculation of the data in these past two months. First, respondents to the household survey were no longer obtained by personal interviews, resulting in both a change in interaction and a drop of at least 15 percentage points in responses. Second, many individuals were incorrectly classified as “employed” when they were, in fact, furloughed for a period they expected to be temporary.

“Adjusting for the selection bias and misclassification of furloughed workers as ‘employed,’” said Anderson, “we estimate the comparable unemployment figure for May at 16.3%”—three percentage points higher than the BLS estimate.

Our adjustment is not a criticism of the BLS methodology. Instead, we note that the agency’s transparency regarding the data collection difficulties allows us the basis for this adjustment.