Nearly 11% of the workforce is out of work with zero chance of getting called back to a prior job

by nyljaouadi1
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Key takeaways:

  • In May, the official unemployment rate was 13.3%. However, the unemployment rate that takes into account all those who are out of work as a result of the virus was 19.7%, and the unemployment rate that includes only those who are out of work and don’t have a reasonable chance of being called back to a prior job was 10.7%.
    • The official unemployment rate was 13.3% in May. However, if you consider not just the 21.0 million officially unemployed, but all 32.5 million workers who are either officially unemployed or otherwise out of work as a result of the virus, that jumps to 19.7%. That is nearly one in five workers.
    • Of the 32.5 million workers who are either officially unemployed or otherwise out of work because of the virus, 11.9 million workers, or 7.2% of the workforce, are out of work with no hope of being called back to a prior job; 5.7 million workers, or 3.5% of the workforce, are out of work and expect to get called back to a prior job but likely will not; and 14.8 million workers, or 9.0% of the workforce, are out of work and can reasonably expect to be called back. That means the share of the workforce that is out of work and has no reasonable chance of being called back to a prior job is 10.7% (7.2% + 3.5%).
  • All three of these unemployment rates are extremely elevated across all demographic groups. However, the highest rates are found among Black and brown workers, women, and particularly Hispanic, Asian, and Black women. Young workers and workers with lower levels of education have also been hit disproportionately hard.
  • It is important to note that the prospect of even those who can reasonably expect to be called back to a prior job actually getting called back will require Congress to act. For example, if Congress doesn’t extend the extra $600 in weekly unemployment insurance payments, that will cost us 5.1 million jobs over the next year, and if it doesn’t provide fiscal aid to state and local governments to fill in their budget shortfalls, it will cost another 5.3 million jobs by the end of 2021.

In May, the unemployment rate declined to 13.3% from 14.7% in April. That improvement was welcome news, but aside from April, the 13.3% unemployment rate in May was higher than anything we’ve seen since the Great Depression.

And, the unemployment rate is not reflecting all coronavirus-related job losses. In May, 21 million workers were counted as officially unemployed. But there were another 4.9 million workers who were out of work because of the virus but who were being misclassified—they had been furloughed and should have been counted as unemployed and on temporary layoff, but were instead counted as “employed but not at work.” If those workers had been correctly counted as being on furlough instead of employed, the unemployment rate would have been 16.4% in May instead of 13.3%. (This misclassification has gotten a lot of attention, with some suggesting that the Bureau of Labor Statistics (BLS) is cooking the books. That is not the case; BLS was extremely transparent and consistent with their treatment of the data.)

Another group of workers who are left out of the official unemployment rate are those who are out of work as a result of the virus but are not actively seeking work. As is always the case, for a jobless worker who is not on furlough to be counted as unemployed, they must be actively seeking work. Today, that remains impossible for many. I estimate that in May, there were 6.6 million workers who were out of work as a result of the virus but who were being counted as dropping out of the labor force because they weren’t actively seeking work. I arrive at that figure by assuming that the February labor force participation rate (63.4%) is what the May labor force participation rate (LFPR) would have been if the pandemic had not occurred. (Note, this is likely somewhat understating what the LFPR would have been in May without the pandemic since the LFPR had been rising slightly in the year prior to the virus—from 63.1% in February 2019 to 63.4% in February 2020.) Then I multiply the February 2020 LFPR by the May population (age 16+) to estimate what the size of the labor force would have been in May if the coronavirus hadn’t happened, yielding 164.8 million. I then subtract from that the actual May labor force, 158.2 million. The result, 6.6 million, is the number of workers who would have been in the labor force in May if the pandemic hadn’t happened, but, instead, are out of work and not actively seeking work.

Putting that all together—the 21.0 million officially unemployed, the 4.9 million unemployed who are being misclassified as “employed, not at work,” and the 6.6 million who have dropped out of the labor force as a result of the virus—that’s 32.5 million workers who are officially unemployed or are otherwise out of work as a result of the virus. If they had all shown up as unemployed, the unemployment rate would have been 19.7% in May instead of 13.3%. That’s an improvement from the same figure in April, which was 23.5%, but it is still mind-bogglingly high—nearly one in five workers are out of work.

The following chart provides these two unemployment rates—the official rate and the rate that takes into account the officially unemployed and others who are out of work as a result of the virus—by gender, race/ethnicity, education, and age. The rates are incredibly high across the board, but job losses have been particularly stark among Black and brown workers. Historically higher unemployment rates and lower liquid savings make job losses even more devastating for Black workers and their families. Unemployment rates in May were also extremely high among women, and especially Hispanic, Asian, and Black women. Furthermore, the unemployment rate is higher for workers with lower levels of educational attainment, though even among those with advanced degrees, nearly one in 10 are either unemployed or out of work as a result of the virus. The figure also shows that young people have been hit especially hard in this pandemic recession, with more than a third of 16–23 year-olds either officially unemployed or otherwise out of work as a result of the virus. Those graduating right now are in a particularly difficult situation, as they are experiencing extremely limited job opportunities but do not qualify for unemployment insurance, even under the expansive definitions of the CARES Act. Congress should institute a Jobseeker’s Allowance to address this issue.

Official unemployment rate and the unemployment rate that takes into account all workers who are out of work as a result of the virus, by demographic group, May 2020

Official unemployment rate Unemployed but misclassified as “Employed, not at work” Out of the labor force as a result of the virus Total
All 13.0% 3.1% 3.3%
Women 14.3% 3.6% 4.0%
Men 11.9% 2.7% 2.7%
Black 16.7% 3.4% 4.2%
Hispanic 17.2% 3.2% 4.6%
Asian 15.0% 5.3% 4.8%
White 10.7% 2.8% 2.6%
Other 16.8% 2.7% 1.3%
Black women 17.3% 3.5% 4.5%
Black men 16.1% 3.2% 3.9%
Hispanic women 19.5% 4.0% 6.1%
Hispanic men 15.5% 2.6% 3.4%
Asian women 16.1% 5.7% 4.9%
Asian men 13.9% 4.9% 4.6%
White women 11.9% 3.2% 3.2%
White men 9.7% 2.4% 2.0%
Less than HS 22.4% 3.9% 4.2%
High school 16.4% 3.4% 5.1%
Some college 15.2% 3.7% 2.5%
Bachelor degree 8.9% 2.7% 3.3%
Advanced degree 5.3% 1.7% 2.3%
Generation Z (age 16-23) 26.4% 3.1% 5.6%
Millenial (age 24-39) 12.5% 2.7% 3.1%
Generation X (age 40-55) 10.2% 2.9% 2.0%
Baby Boomer (age 56-74) 11.6% 3.7% 3.0%
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The data below can be saved or copied directly into Excel.