WASHINGTON–What had been considered a stunning improvement in the unemployment rate announced on Friday doesn’t appear to be such a rosy number after all. But the job gains posted remain a surprising positive nonetheless.
The Labor Department said last week the U.S. jobless rate has declined to 13.3%, with more than 2.5 million jobs added during May, which was a huge turnaround from just one month earlier and a strong contrast to what many economists had been forecasting. But the Labor Department’s Bureau of Labor Statistics also included a footnote stating there had been a major “miscalculation error” in determining the unemployment rate itself, explaining its data collectors had for the third month in a row misclassified some workers as “employed not at work,” when they should have been classified as “unemployed on temporary layoff.”
Adjusting for that change, the unemployment rate could have been as high as 19.2% in April and 16.1%--not 13.3%--in May.
Analysts have said the primary issue for BLS is the challenge of collecting so much data in real time. The unemployment rate comes from a survey where Census workers ask approximately 60,000 households questions about whether they are working or looking for work.
According to the Washington Post, “One of the first questions that gets asked is did the person do any work ‘for pay or profit?’ There are then 45 pages of follow up questions that come after that. One of those questions asks if someone was ‘temporarily absent’ from the job and why that absence occurred. One of the responses is ‘other.’” The way BLS has handled the “other” responses has been at the crux of the misreporting, according to analysts.
The Labor Department had initially said May’s increase in employment was the largest on record--as the gradual reopening of the economy actually added new jobs rather than eliminating further positions. Many hotels and recreation-related businesses have been among those reopening just in time for summer, which has driven the gains.
Construction showed the second biggest gains in new jobs.
Labor Force Participation Increases
Brian Turner, president and chief economist with Meridian Economics, noted the labor force participation rate increased by 0.6 percentage point in May to 60.8%, following a decrease of 2.5 percentage points in April. Total employment, as measured by the household survey, rose by 3.8 million in May to 137.2 million, following a large decline in April. After an 8.7 percentage-point decline in April, the employment-population ratio rose by 1.5 percentage points to 52.8 percent in May, said Turner, who called the May report “astonishing.”
Turner said the new data show the number of unemployed persons who were jobless less than five weeks decreased by 10.4 million to 3.9 million.
“These individuals made up 18.5% of the unemployed. The number of unemployed persons who were jobless five to 14 weeks rose by 7.8 million to 14.8 million, accounting for about 70.8% of the unemployed,” said Turner. “The number of long-term unemployed (those jobless for 27 weeks or more), at 1.2 million, increased by 225,000 over the month and represented 5.6% of the unemployed.”
Other Data Points
Other data points in the latest numbers from the Labor Department:
- After a decline of 1.3 million positions, manufacturing jobs increased by 225,000.
- Average hourly earnings actually decreased by 6.7% from a year ago, but for the right reasons, as more lower-wage workers came back to work. April saw an unprecedented jump of 8% that came primarily because the cuts were so heavily weighted towards lesser-paying service industry jobs.
The average work week rose 0.5 hours to 34.7