October 2, 2020

The unemployment rate fell 0.5% in September to 7.9% after having declined 1.8% in August and 0.9% in July.  After having jumped 10.3 percentage points in April from 4.4% to 14.7% the unemployment rate has declined in each of the five months since.  The labor force fell by 695 thousand in September (after having increased by 968 thousand in August).  Employment increased by  275 thousand in September (after climbing by 3,756 thousand worker in August).  As a result, the number of unemployed workers declined by 970 thousand in September (versus a decline of 2,778 thousand in August) and the unemployment rate declined to 0.5% to 7.9%.  Payroll employment rose by 661 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 fell somewhat in September.  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 decline in the labor force in September labor force growth in the past year is now -2.4%

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, but it has fallen somewhat in the July, August, September period.

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 every month since then and now stands at 12.8%.  Full employment for this measure of unemployment is somewhere around the 8.0% mark.

The youth unemployment rate fell 1.2% in September to 13.5% after having declined 3.9% in August and 2.1% in July.  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 every month since.

Q2 GDP declined 31.7%%.  However,  the government’s $3.0 trillion in fiscal stimulus has quickly spread into the economy.  As a result we , anticipate an increase in GDP of 28% or so in Q3 and 7.0% growth in the fourth quarter.

Stephen Slifer


Charleston, SC