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May Unemployment Rate Explained | Why is Unemployment Falling?
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The May unemployment rate was stunning, leaving many to wonder what is happening with the unemployment rate. In this video, I explain the reasons behind the unexpected drop in unemployment rate.
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The Bureau of Labor Statistics (BLS) released unemployment data for May on Friday morning. The official unemployment rate for May was 13.3 percent, down 1.4 percent from April's rate of 14.7 percent.
Though some people classified as "unemployed on temporary layoff" were correctly identified, the BLS estimates that about 4.9 million workers out of 5.4 million were erroneously listed as being employed.
Barring that issue, the unemployment rate could have been as high as 19.2% in April and 16.1% in May, not including seasonal adjustments, the BLS said.
The official unemployment rate also leaves out many people who are not actively looking for jobs or are working reduced hours. A broader measure of unemployment and underemployment, which includes those groups, was 21.2 percent in May, down from April but higher than any other month on record.
Job growth was concentrated in industries hit hardest early in the crisis, like leisure, hospitality and retail work. But manufacturing, health care and professional services added jobs as well, possibly signaling that the damage did not spread as deeply into the economy as many feared.
All the same, economists warn that it will take far longer for the economy to climb out of the hole than it did to fall into it.
And even as the economy shows signs of revival, the United States is confirming more than 20,000 new coronavirus cases a day, with counts rising in particular in the South and the West.
While employers recalled temporarily laid-off or furloughed workers in May, the number of permanent job losses rose, a sign that some businesses didn’t survive the shutdown, or expect demand to stay depressed as the economy reopens. Others are bringing back workers at reduced hours: The number of people working part time because they couldn’t find full-time work barely budged. And millions more people have been laid off in the weeks since the data released Friday was collected in mid-May.
How is unemployment calculated?
Despite what many people believe, the unemployment rate is not measured by calculating the number of people collecting unemployment insurance.
The US Census Bureau employees collects demographic data on workers that goes into the BLS report, calling around 70,000 households a month.
Each month, U.S. Census employees contact the households in the sample and ask specific questions to determine employment status.
The first piece of information they want to determine is how many people in the household are actually in the labor force, meaning these people have jobs or are actively looking for jobs.
For example, suppose that during a given month, the BLS gathers information on a total of 100,000 people from the 60,000 survey households. A total of 25,000 of those people claim they do not have a job and are not actively looking for one. These people are classified as not in the labor force. They are not counted toward the unemployment rate.
The remaining 75,000 people claim to be active members of the labor force, either because they have a job or they are actively looking for one.3 Of those respondents, 70,000 are gainfully employed, while the other 5,000 are unemployed but looking for work. Therefore, 93.3% of respondents in the labor force are employed; the remaining 6.7% are considered unemployed. The official unemployment rate for that month is 6.7%.
DISCLAIMER: Colette Bishogo (The Money Tea), including but not limited to any guests appearing in these videos, are not financial/investment advisors, brokers, or dealers. They are solely sharing their personal experience and opinions; therefore, all strategies, tips, suggestions, and recommendations shared are solely for entertainment purposes. There are financial risks associated with investing, therefore, do not act or refrain from acting based on any information conveyed in this video, webpage, and/or external hyperlinks. For investment advice please seek the counsel of a financial/investment advisor(s); and conduct your own due diligence.
PLEASE SUBSCRIBE FOR A NEW VIDEO EVERY WEEK!
WEBSITE
FOLLOW
The Bureau of Labor Statistics (BLS) released unemployment data for May on Friday morning. The official unemployment rate for May was 13.3 percent, down 1.4 percent from April's rate of 14.7 percent.
Though some people classified as "unemployed on temporary layoff" were correctly identified, the BLS estimates that about 4.9 million workers out of 5.4 million were erroneously listed as being employed.
Barring that issue, the unemployment rate could have been as high as 19.2% in April and 16.1% in May, not including seasonal adjustments, the BLS said.
The official unemployment rate also leaves out many people who are not actively looking for jobs or are working reduced hours. A broader measure of unemployment and underemployment, which includes those groups, was 21.2 percent in May, down from April but higher than any other month on record.
Job growth was concentrated in industries hit hardest early in the crisis, like leisure, hospitality and retail work. But manufacturing, health care and professional services added jobs as well, possibly signaling that the damage did not spread as deeply into the economy as many feared.
All the same, economists warn that it will take far longer for the economy to climb out of the hole than it did to fall into it.
And even as the economy shows signs of revival, the United States is confirming more than 20,000 new coronavirus cases a day, with counts rising in particular in the South and the West.
While employers recalled temporarily laid-off or furloughed workers in May, the number of permanent job losses rose, a sign that some businesses didn’t survive the shutdown, or expect demand to stay depressed as the economy reopens. Others are bringing back workers at reduced hours: The number of people working part time because they couldn’t find full-time work barely budged. And millions more people have been laid off in the weeks since the data released Friday was collected in mid-May.
How is unemployment calculated?
Despite what many people believe, the unemployment rate is not measured by calculating the number of people collecting unemployment insurance.
The US Census Bureau employees collects demographic data on workers that goes into the BLS report, calling around 70,000 households a month.
Each month, U.S. Census employees contact the households in the sample and ask specific questions to determine employment status.
The first piece of information they want to determine is how many people in the household are actually in the labor force, meaning these people have jobs or are actively looking for jobs.
For example, suppose that during a given month, the BLS gathers information on a total of 100,000 people from the 60,000 survey households. A total of 25,000 of those people claim they do not have a job and are not actively looking for one. These people are classified as not in the labor force. They are not counted toward the unemployment rate.
The remaining 75,000 people claim to be active members of the labor force, either because they have a job or they are actively looking for one.3 Of those respondents, 70,000 are gainfully employed, while the other 5,000 are unemployed but looking for work. Therefore, 93.3% of respondents in the labor force are employed; the remaining 6.7% are considered unemployed. The official unemployment rate for that month is 6.7%.
DISCLAIMER: Colette Bishogo (The Money Tea), including but not limited to any guests appearing in these videos, are not financial/investment advisors, brokers, or dealers. They are solely sharing their personal experience and opinions; therefore, all strategies, tips, suggestions, and recommendations shared are solely for entertainment purposes. There are financial risks associated with investing, therefore, do not act or refrain from acting based on any information conveyed in this video, webpage, and/or external hyperlinks. For investment advice please seek the counsel of a financial/investment advisor(s); and conduct your own due diligence.
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