Are Americans finally returning to work after months of unemployment amid coronavirus lockdowns? Confusion and controversy now mire the positive announcement made by the U.S Bureau of Labor Statistics (BLS) on June 5: Employers added 2.5 million jobs in May, dropping the jobless rate from April’s 14.7% to 13.3%.
Many economists expected millions of additional job losses during May, leading them to question the data provided by the BLS. Some even claim that the BLS purposefully published misleading numbers. So what’s really going on? Here’s what you need to know about the state of the economy in June 2020.
Bureau of Labor Statistics Reports Misclassifications
On June 5th, the BLS released its report stating, “Total nonfarm payroll employment rose by 2.5 million in May, and the unemployment rate declined to 13.3%. These improvements in the labor market reflected a limited resumption of economic activity that had been curtailed in March and April due to the coronavirus (COVID-19) pandemic and efforts to contain it.”
However, a caveat at the bottom of the report is gaining a great deal of attention. As the BLS transparently explains, a “large number of workers” were classified as “employed by absent from work” rather than classified as “unemployed on temporary layoff. The same misclassification occurred in March and April, according to the BLS report, but it’s only gained public attention now that unemployment dropped when most expected it to rise.
“As was the case in March and April, household survey interviewers were instructed to classify employed persons absent from work due to coronavirus-related business closures as unemployed on temporary layoff. However, it is apparent that not all such workers were so classified. BLS and the Census Bureau are investigating why this misclassification error continues to occur and are taking additional steps to address the issue,” BLS wrote.
Taking these misclassifications into consideration, the BLS calculates that the overall unemployment rate “would have been about 3 percentage points higher than reported” in May. The same margin of error must also be applied to March and April, since the BLS observed the same misclassifications every month since the pandemic emerged.
“There does seem to be a mistaken notion that this is some kind of interference or some kind of wrongdoing,” said Betsey Stevenson, a professor of public policy and economics and the University of Michigan. “They’re actually very upfront with the idea that if you want to reclassify these people as unemployed, this is exactly the unemployment rate you would get.”
If taking misclassifications into consideration, March unemployment would have been 5.4% instead of 4.4%, April unemployment would have been 19.7% rather than 14.7%, and May unemployment would sit at 16.3%, not 13.3%. Either way the data is assessed, the unemployment rate does indeed appear to have dropped. In fact, when misclassifications are considered, the unemployment rate shows a larger drop of 3.4% compared to 1.4%.
Jobs Added As Service and Hospitality Workers Return
As the BLS reports, “In May, employment rose sharply in leisure and hospitality, construction, education and health services, and retail trade.” This is a reflection of the number of Americans called back to work as their employers reopened from government-mandated shutdowns.
Dentists, retail stores, restaurants, bars, and casinos have all been able to reemploy workers who were previously laid off, furloughed, or fired. In fact, dentists’ offices accounted for a full 10% of job gains in May, while more than half of the 2.5 million returning jobs were at bars, restaurants, casinos, and other forms of entertainment.
At Wing Zone in Atlanta, for example, chief executive Matt Friedman has added five to ten workers to each of his two taverns that recently reopened after months of shutdown. “The No. 1 customer call that comes in is not, ‘Can I place an order?’ It’s, ‘Do you have dining?’” he explained.
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