Why Friday's U.S. jobless figures won't capture the true state of the coronavirus economy

[Sergey Golubev]

Explainer: Why Friday's U.S. jobless figures won't capture the true state of the coronavirus economy

The U.S. economy is expected to have shed 22 million jobs in April, tripling the nationwide unemployment rate to 16%, when new government data is published Friday morning.

To put that into perspective, the U.S. economy has never lost more than 2 million jobs in a single month. And although the unemployment rate reached 25% in 1933, it got there much more slowly.

But even these grim estimates, from economists polled by Reuters in recent weeks, don’t capture the staggering impact of the coronavirus pandemic on the workforce in the world’s largest economy.

The unemployment rate is part of a monthly report from the federal government’s Labor Department, showing how many people don’t have jobs as a percentage of the overall American workforce. The “jobs report,” as the release is known, provides two important labor market yardsticks: that unemployment rate, generated by a survey of households, and nonfarm payrolls, from a survey of businesses.

The unemployment rate has long been an indicator of the health of the economy, shrinking when jobs are plentiful and rising when times get hard.

A 16% unemployment rate means that 16 out of every 100 people who want to be in the nonfarm workforce don’t have jobs. That is a lot more than the 4.5% rate in March.

But some economists believe the “true” unemployment rate for April could be double that - meaning that more than a third of Americans who want or need to work cannot do so.

By the way, a pair of economists at the Chicago Fed recently crunched the numbers and found that accounting for such people would lift the real unemployment rate in the United States to between 25.1% and 34.6% - worse than the Great Depression-era numbers.

more..