Friday, April 3, 2020

How bad is it? Bad, really bad - Part 5

You will see headlines today that the unemployment rate (based on a survey in mid-March (before the full effects of the coronavirus campus began to be felt) jumped from 3.5% in February to 4.4% in March. A jump by that magnitude is itself highly unusual. Moreover, buried in the news release from the U.S. Bureau of Labor Statistics is this sentence:

If the workers who were recorded as employed but absent from work due to “other reasons” (over and above the number absent for other reasons in a typical March) had been classified as unemployed on temporary layoff, the overall unemployment rate would have been almost 1 percentage point higher than reported. However, according to usual practice, the data from the household survey are accepted as recorded. To maintain data integrity, no ad hoc actions are taken to reclassify survey responses.*

In short, respondents to the survey on which the unemployment rate and other labor force data are based in March may be understated by a percentage point due to confusion because of the unusual circumstances. If the official jump in the unemployment rate by 0.9 percentage points is highly unusual, a jump of 1.9 percentage points (based on the confusion adjustment) is another off-the-chart data point.

Note: Data at the state level will become available later.

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