Jobs on LI: Pandemic’s impact on employment

In just under five short months, the coronavirus epidemic has infected over 16 million people, displaced a couple hundred million workers and forced many into indefinite periods of quarantine while a global race to sustainable recovery ensues.

U.S.’s path to post-COVID recovery seems murkier coupled with recent resurgances in infection rates. President Donald Trump, however, points to recent monthly employment data as a promising indicator for the “greatest comeback in American history.”

At an early June Rose Garden jobs report press briefing, the president embraced an unexpected 1.4% decline in April-May national unemployment rates as evidence the American economy is roaring back like a rocket ship.

Now, in recent headlines, reports of a significant “misclassification error” found in the same U.S. Bureau Labor of Statistics job report show official unemployment rates were higher than initially reported in March, April and May.

That means the nation’s economic reality was understated since the early documentation of the pandemic, however, BLS’s transparency on this error is indicative of a unique set of measuring limitations only a pandemic-induced recession has exposed––and statistical agencies were wholly unprepared for.

Our “Jobs on LI” series dives into the pandemic’s regional impact on LI’s job economy and major sectors, but first, let us walk you through how BLS’s misclassification error distorted America’s post-COVID recovery.

How did the misclassification error affect unemployment rates?

If people on temporary lay off were correctly classified as unemployed rather than employed (but absent from work), BLS acknowledged unemployment rates would’ve been higher than reported: around 20% in April rather than the reported 14.7% and around 16% in May rather than the reported 13.3%.

By June, BLS said misclassification errors declined considerably as a result of increased efforts to more accurately classify furloughed workers, and have been aware of these errors since March (which were footnoted in March, April and May reports on the country’s economic situation).

BLS reported the rate in June stands at 11.2%, in contrast with the 12.4% produced by White House’s Council of Economic Advisors (accounting for misclassification).

In a report addressing FAQ’s on the misclassification error, BLS laid out how it affected the rate of national unemployment in May.

5.4 million Americans in May reported they had a job but were not working, and included in the “other reasons” category. Compared to May 2016-2019 averages, there were an additional 4.9 million workers in the “other reasons” category.

If it was assumed 4.9 million workers should have been classified as unemployed on temporary layoff, the number of unemployed people in May would increase by 4.9 million from 20.5 to 25.4 million––yielding a 16.4% (seasonally adjusted) May unemployment rate.

That means the 3% gap between the reported and officially recorded May unemployment rates was the difference of about 4.9 million workers.

What happened?

BLS’s measuring practices for unemployment were not designed for the unusual circumstances of the pandemic at hand. To understand how the monthly rate in May excluded 4.9 million temporarily laid off workers and skewed the rate by 3%, we must define BLS’s criteria of employed and unemployed persons.

In BLS’s monthly Current Population Survey of U.S. households, people 16 and over are put into three categories:

  • Employed — they worked at least one hour “for pay or profit” during the past week.
  • Unemployed — they did not work but actively looked for work during the past 4 weeks OR they were on temporary layoff and expect to return to work.
  • Not in the labor force — everyone else (including students, retirees, those who have given up their job search, and others).

The misclassification error hinges on this question: What are the main reasons for unemployment during a pandemic and how have they changed from before?

Since the COVID-19 outbreak began, a substantial number of American workers were reporting being absent from work during a given survey reference week for “other reasons,” and were counted as employed based on BLS’s definitions.

In normal times, individuals are considered employed if they did any work for pay or profit, or if they were absent from work during the survey week, which often meant those on vacation, home sick or on jury duty.

Millions of furloughed workers, however, have been unable to return to work during the pandemic and should’ve been counted as “unemployed on temporary layoff” instead of “employed but absent from work,” according to BLS.