July 2, 2020

The unemployment rate fell 2.2% in June to 11.1% after having fallen 1.4% in May to 13.3% after having jumped 10.3 percentage points in April from 4.4% to 14.7%.  The labor force rose by 1,705 thousand in June.  Employment rose by 4.940 thousand workers.  As a result, the number of unemployed workers declined by 3.235 thousand and the unemployment rate declined to 11.1%.  Payroll employment fell by 4,800 thousand.  How come the two estimates of employment are different?  First, the two are figures are derived from separate data streams.  The payroll number is calculated from employment numbers reported by a large number of employers across all industries.  Employment for the unemployment rate calculation is derived from knocking on doors and asking people if they have a job.  It is known as the  household survey.  One conceptual difference is that the household survey includes people who are self-employed which would not be captured in the establishment survey. It could be that self-employed workers rose relatively little in June.  The other reality is that there is just statistical noise between the two surveys.  The trend rate of growth is similar, but with wide variation from month to month — the household survey being the more volatile of the two.

With the moderate increase in the labor force growth in both May and June following the big drop in April labor force growth in the past year is now -2.0%

While the official rate is the most widely used, the reality is that the official rate can be misleading because it does not include “underemployed” workers which is true.  There are two types of “underemployed” workers.  First, there are people who have unsuccessfully sought employment for so long that they have given up looking for a job.  Second, are those workers  that currently have a part time position but indicate that they would like full time employment.  The total of these two types of underemployed workers are  “marginally attached” to the labor force.  The number of marginally attached workers jumped sharply in April, May and June as both types of marginally attached workers rose..

We should probably be focusing more on the broadest measure of unemployment because it includes these underemployed individuals.  The broad rate jumped by 14.1% in April from 8.7% to 22.8%, but then declined somewhat in May to 21.2% and fell further to 18.0% in June.  Full employment for this measure of unemployment is somewhere around the 8.0% mark.

The  youth unemployment rate fell 4.5% in June from  25.2% to 20.7%.  It peaked in April at 27.4%.

There are a number of part time workers who say they want full time employment.  Like every other employment indicator it jumped sharply in April but then declined in both May and June.

Q2 GDP is on track to decline by 50.0%.  That figure will be released at the end of July.

However,  the government’s $2.5 billion in fiscal stimulus is quickly spreading into the economy.  As a result we , anticipate an increase in GDP of 50% or so in Q3 and 7.0% growth in the fourth quarter.

Stephen Slifer


Charleston, SC