The business shutdowns forced by the coronavirus pandemic have put tens of millions of Americans out of work, pushing unemployment to historic levels not seen since the Great Depression.
Each week seems to bring a new grim statistic about the labor market. But there are important distinctions among the different kinds of economic data released by the government, and they tell different stories about the economy.
Here’s what you need to know about how the government tracks and measures unemployment. It might help you better understand the economic impact of the pandemic.
What is the unemployment rate?
The unemployment rate, perhaps the most closely watched economic indicator, is the percentage of the U.S. labor force that is unemployed. The labor force is all people 16 and older who are either working or actively looking for work.
But the government does not count every unemployed person when calculating the unemployment rate. Instead, the Census Bureau conducts a monthly survey of about 60,000 households, covering roughly 110,000 people, to estimate the number of people unemployed and the size of the labor force.
Although the sample is not a count of every unemployed person, it is much larger than samples used in common public opinion surveys of fewer than 2,000 people, and is selected to be representative of the entire population, according to the Bureau of Labor Statistics (BLS).
Is everyone without a job ‘unemployed'?
No. People are considered unemployed if they do not have a job, actively looked for work within the last four weeks, and are currently available for work. So people without work who aren’t actively job-hunting aren’t considered part of the labor force, which is the total number of people who are employed and unemployed
For example, a stay-at-home parent who isn’t looking for a job or someone who can’t work because of a disability would not be considered unemployed under the federal government’s definition.
Are more people jobless than the unemployment rate indicates?
Probably. Critics argue that the government’s definition of unemployment is too narrow and may miss millions of Americans who recently lost jobs or stopped looking for work.
For example, those who merely attend job training programs or read job postings online don’t qualify as “actively” looking for work. According to the BLS, “actively” looking for work includes submitting resumés, answering job advertisements, or contacting employers directly.
Workers who expect to be recalled from a temporary layoff are counted as unemployed regardless of if they’ve actively sought a job. But in all other cases, a person must have actively job-hunted in the last four weeks and be available to work to be counted as unemployed.
For example, the U.S. Department of Labor reported that 23.1 million Americans were unemployed as of April. But the American Institutes for Research estimates that official count may exclude 8 million people who lost jobs or stopped searching for work between February and April. The Washington research group noted the pandemic’s stay-at-home orders could make it hard for people to look for work, resulting in an undercount of unemployment.
What are unemployment claims and why are they important?
Every Thursday, the Department of Labor reports how many Americans filed claims seeking unemployment insurance benefits.
Initial claims refer to the number of people filing for unemployment claims for the first time after losing work. It is a good indicator of emerging labor market conditions, such as the levels of layoffs.
Continued claims are the total number of workers receiving unemployment benefits. This figure, which lags a week behind initial claims, can be useful in understanding the direction of the economy. In the context of an economy coming out of massive layoffs triggered by the pandemic, it can tell you whether businesses have started hiring again.
“As new claims numbers come down, we have to start focusing on the insured people," said Joel Naroff, president and founder of Naroff Economic Advisors in Bucks County. “As the economy opens up, if you’re hiring back people, they’re going to come off of the unemployment rolls.”