May 6, 2022

The unemployment rate was unchanged in April at 3.6% after having fallen 0.2% in March.  The labor force fell by 363 thousand in  April. Employment declined by 353 thousand.  As a result, the number of unemployed workers fell by 311 thousand in April and the unemployment rate was unchanged at 3.6%. Payroll employment rose 428 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.  There is always monthly noise between the two series.  Over time the two surveys seem to show roughly comparable gains in employment.

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 these workers has declined steadily since the recession ended in April of 2020, but it is still slightly higher than it was prior to the recession.

We should probably be focusing more on the broadest measure of unemployment because it includes all of these underemployed individuals.  The broad rate jumped by 14.1% in April 2020 from 8.7% to 22.8%, but then declined steadily.  It rose 0.1% to 7.0% in April after having fallen 0.3% in March.  Full employment for this measure of unemployment is somewhere around the 8.0% mark which is where it was prior to the recession.

Given the steady gains in employment we look for GDP growth of 2.0% in 2022.

Stephen Slifer

NumberNomics

Charleston, SC