What Do the Economic Numbers Mean?
Data reported April 23 by the U.S. Department of Labor shows that an additional 4.4 million workers filed new unemployment claims during the week ending April 18.
Erica Groshen, an economist who served as commissioner of the U.S. Bureau of Labor Statistics and who is now an ILR senior extension faculty member, provided insight on the new information.
“The high pace at which new filings continue to flow in reinforces forecasts that the national unemployment rate for April will soar to substantially over 10 percent, perhaps in the neighborhood of 20 percent, of the labor force. Unemployment during the Great Depression is estimated to have peaked at a bit over 25 percent.
“With the unemployment insurance filings we have now seen, the main factors that could constrain the unemployment rate to 13 percent or below would be many job losers considering themselves out of the labor force for now and/or working much shorter hours.
“Going forward, once restrictions can be lifted safely, the speed of economic recovery will be strongly affected by how many workers now filing were laid off temporarily versus permanently. Workers on temporary layoff have an employer to return to. They can be recalled quickly and become immediately productive. Those on permanent layoff will need to search, be hired and then be onboarded and trained before they are fully productive.”
Previous reactions from Groshen on economic data released by the government:
As of April 11, 22 million Americans had applied for unemployment benefits in the wake of COVID-related economic restrictions. How will that ripple through the economy? Groshen explains why these numbers are just the tip of an economic tsunami whose full force will become more apparent in May.
"The recent pace of initial claims is very rapid and translates into consequential impacts on headline labor market statistics that we won't see until May 8, when the April Employment Situation is released, because of how the statistics are constructed. Indeed, some impacts may not register for months.
"Simple arithmetic suggests that switching 22 million U.S. workers from employed to unemployed raises the U.S. unemployment rate to 17 percent, a rise in the neighborhood of 15 percentage points. By this calculation, the change in unemployment rate is guaranteed to dwarf any previous one-month change in the unemployment rate. This would be much higher than the 10 percent unemployment rate at the height of the Great Recession and approaching levels last seen only during the Great Depression.
"However, surely not all COVID furloughed workers have filed for unemployment insurance yet. Some were laid off after April 11 and some have been thwarted by the inability of states’ intake systems to handle the huge influx of applications. And, in recent years, only about one fourth to one third of the unemployed are receiving unemployment insurance. If we assume that under these circumstances, only 80 percent of furloughed workers filed, then the unemployment rate implied rises to 20 percent and the job losses are almost 32 million.
"Note, however, that some furloughed workers may report themselves as temporarily out of the labor force for health reasons or in order to care for children or other family members. To the extent that happens, the impact on the unemployment rate will be muted. Thus, it makes sense to also focus on the employment to population ratio. which was at 61.1 in February. Switching 32 million workers out of employment lowers the ratio to 50.9 percent.
"In the payroll survey -- the other source for the Employment Situation -- losing 22 million jobs (let alone 32 million jobs) over one or two months would dwarf the previous all- time largest decrease in payroll jobs -- 1.96 million in September 1945, at the end of World War II. It would also dwarf the cumulative losses of 8.7 million over 24 months from February 2008 to February 2010 stemming from the Great Recession."