The Unemployment Rate and COVID-19

National Press Foundation June 30, 2020

Erica L. Groshen
Former Commissioner of US Bureau of Labor Statistics
Cornell University
 Agenda
• “The Employment Situation” news release
• How BLS protects data integrity
• Concepts in the Current Population Survey
• COVID-19 and misclassification

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THE EMPLOYMENT
SITUATION NEWS
RELEASE

Usually first Friday of

month, for previous month

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 2 headline indicators
• Unemployment rate
– Household survey (Current Population Survey, CPS) of 60,000+ homes
– Records shares of people working, looking for work, and out of labor force as of
15th of month
– Detail by demographics, occupation, duration
of unemployment, etc.
• Payroll job growth
– Establishment survey of >600,000
worksites (1/3 of non-farm jobs)
– Counts jobs during pay period covering 15th of
month, not people
– Detail by industry
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 What’s revised or noisy?
• Unemployment rate—noisy
– Not revised (minor seasonal and population fixes)
– Sampling noise especially affects subgroups
(teen, African American…)
– + 0.2 percentage points

• Payroll job growth—revised

– Sampling noise minimal
– Newest 2 months preliminary
• Late reports cause revisions (usually small)
– Annual rebenchmarking adds more revisions (usually small)
– + 100,000 (on 150 million jobs) 5
 History of US
unemployment rate

15.8%
12/40

0.8%
9/44

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 How BLS protects data integrity
• Transparent methods
– Handbook of Methods, advisory committees, notes, published errata
– Tight published deadlines with regimented, limited-access processes
– Two independent surveys, collaboration with states and Census
– Microdata access
• Other protection
– Commissioner--single 4-year appointee, professional, only sees final numbers
– Staff--culture, training, background checks, criminal penalties
– Practices--agency and OMB directives, CNSTAT,
DOL Inspector General
• Red flags
– Delay, incomplete release, process or staff change,
staff report
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CONCEPTS IN THE CURRENT POPULATION
SURVEY

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 Status classification
Hierarchical, mutually exclusive
Population

Employed Not Employed

(Step 1)
Unemployed
(Step 2) Not in Labor Force

Marginally
Labor Force Attached (Step 3)
Discouraged
(Step 4)
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 Unemployment concept

Concept: How much of our labor force is unemployed?

Equation:

EMPLOYED + UNEMPLOYED
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 Segmenting unemployment
• How entered (entrant, re-entrant, temporary layoff,
ended temporary job, quit, permanent layoff…)
• Demographics (age, sex, education, race, ethnicity…)
• Industry, occupation
• Duration
• State, metro area
– Released 2 weeks after Employment Situation

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 More measures of labor
market conditions
• Alternative labor underutilization add-ons
– U4 +Discouraged workers
– U5 +All marginally attached workers
– U6 +Part-time for economic reasons
• Long-term unemployment
• Participation rate
• Employment-to-population ratio
• Wage growth
• Hours worked
• JOLTS (quits and job openings)
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COVID-19 AND MISCLASSIFICATION

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 What’s the misclassification issue?
• BLS believes many workers temporarily laid off were
misclassified as “employed but not at work for other reasons”
– Such leaves are employee-initiated
• Listed reasons include vacation, sick, family care, parental, jury duty
– Unemployed workers on temporary layoff needn’t search and may
receive pay or benefits
• So, official unemployment was underestimated
• Noticed in October 2013, January 2019
and March-May 2020
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 BLS estimates of scale of
misclassifications
  Percent of the labor force, seasonally adjusted

Misclassifications BLS estimated Total:

as a share of all Official
impact of official rate plus
temporary layoffs unemployment correcting impact of
rate
misclassifications misclassifications

February -- 3.5% -- 3.5%

March 39% 4.4% +0.9% 5.3%
April 30% 14.7% +4.8% 19.5%
May 25% 13.3% +3.1% 16.4%
Source: U.S. Bureau of Labor Statistics and author’s calculations. 15
 Unemployment rate impact
Percent of the labor force, seasonally adjusted
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Official unemployment rate plus impact of misclassifications
20

15

10
Official unemployment rate
5

0
January February March April May
Source: U.S. Bureau of Labor Statistics and author’s calculations. 16
 How did it happen?
• COVID-19 altered many things rapidly
• Many employees had informal arrangements
– May have charged a leave category
– Little prior experience with temporary layoffs
– Self-employed and contractors likely answered as employed
• Special guidance to Census interviewers only partly effective
– Issued for March, April and May, with increasing effectiveness
– New to many interviewers also
• Not incompetence or manipulation
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 Why not “fix” the unemployment rate?

• Changing respondent answers violates practices that protect

data integrity
• Estimates don’t identify which respondents erred
– Also lack data to characterize unemployed workers
• Changing only top line makes it inconsistent with
granular measures
• Estimation not vetted enough for a principal
federal economic statistic

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 What should data users do?
• Ask BLS for guidance
• Mostly use official rate, to preserve important consistencies
• For broad policy response, may use an
adjusted rate
• For macro modeling, consider an adjusted
rate
• Expect convergence over time
– Further emphasis to interviewers
– Fewer temporary layoffs
• Support statistical agencies’ independence
and resources
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 Erica L. Groshen
Senior Labor Economics Advisor, Cornell-ILR
Research Fellow, WE Upjohn Institute for Employment Research
erica.groshen@gmail.com

https://
www.ilr.cornell.edu/work-and-coronavirus/work-and-jobs/will-true-unemployment-rate-please-sta
nd

https://www.upjohn.org/research-highlights/will-true-unemployment-rate-please-stand-misclassi
fication-may-2020-jobs-report

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REFERENCE SLIDES

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 BLS mission
• Principal Federal agency
responsible for measuring
– labor market activity
– working conditions
– price changes in the
economy
• Collect, analyze, and disseminate
essential economic information
• Support public and private decision
making
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 Step 1: Who is employed?
• Employed people did some work for pay or profit during the survey
reference week.
• Includes all part-time and temporary work, as well as regular full-time, year-round
employment.
• Includes individuals who have a job at which they did not work during the survey
week, whether they were paid or not, because they were:
• On vacation
• Ill
• Experiencing child care problems
• On maternity or paternity leave
• Taking care of some other family or personal obligation
• Involved in a labor dispute
• Prevented from working by bad weather
Note: These people are counted among the employed and tabulated separately as with a job but not
at work, because they have a specific job to which they will return. 23
 Step 2: Who is unemployed?
• People are classified as unemployed if
• They do not have a job, and
• Have actively looked for work in the prior 4 weeks, and
• Are currently available for work (except for temporary illness)
• Actively looking for work means any of the following:
• Contacting:
• An employer directly or having a job interview
• A public or private employment agency
• Friends or relatives
• A school or university employment center
• Submitting resumes or filling out applications
• Placing or answering job advertisements
• Checking union or professional registers
• Some other means of active job search
• Passive methods of job search don’t have the potential to connect job seekers with employers and
therefore do not qualify as active job search methods
• Examples: attending a job training program or merely reading about job openings posted in newspapers or online
• Also, workers expecting to be recalled from temporary layoff are counted as unemployed whether or
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not they have engaged in a specific job seeking activity
 Who is not in the labor force?
• People are classified as not in the labor force if
• They are neither employed nor unemployed.
• Many are
• In school
• Retired
• Caring for family members
• Some (since the mid-1990s, typically fewer than 1 in 10), report that they
want a job.

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Current Population Survey basics
• Partnership between BLS and Census
• Census fields survey and “owns” demographic questions
• BLS “owns” labor market questions
• Sample of US residences maintained by Census
• Stratified random sample
• 60,000 households/mo.; >120,000 people covered
• First contact in person; rest usually by phone
• Respondent answers for all age 16+ people in household
• 4 months in; 8 months out; 4 months in
• 85% response rate, falling slowly

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 Major questions determine
employment status
1. Does anyone in this household have a business or a farm?
2. Last week, did you do any work for either pay or profit?
If the answer to question 2 is "yes“ he or she is counted as employed.
If the answer to question 1 is "yes" and the answer to question 2 is "no," the next question is:
3. Last week, did you do any unpaid work in the family business or farm? 
For those who reply "no" to both questions 2 and 3, the next key questions used to determine
employment status are:
4. Last week, (in addition to the business) did you have a job, either full or part time? Include
any job from which you were temporarily absent.
5. Last week, were you on layoff from a job?
6. What was the main reason you were absent from work last week? 
For those who respond "yes" to question 5 about being on layoff, the following questions are
asked:
7. Has your employer given you a date to return to work? 
If "no," the next question is:
8. Have you been given any indication that you will be recalled to work within the next 6
months? 
If the responses to either question 7 or 8 indicate that the person expects to be recalled from
layoff, he or she is counted as unemployed.
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 Major questions determine
employment status
For those reported as having no job or business from which they were absent or on layoff,
the next question is:
9. Have you been doing anything to find work during the last 4 weeks?
For those who say "yes," the next question is:
10. What are all of the things you have done to find work during the last 4 weeks?
If an active method of looking for work, such as those listed at the beginning of this section,
is mentioned, the following question is asked:
11. Last week, could you have started a job if one had been offered? 
If there is no reason, except temporary illness, that the person could not take a job other
than temporary illness, he or she is considered to be not only looking but also available for
work and is counted as unemployed.
If the person is neither employed nor unemployed, he or she is not in the labor force.

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 Major questions determine employment status
1. Does anyone in this household have a business or a farm?
2. Last week, did you do any work for either pay or profit?
If the answer to question 2 is "yes“ he or she is counted as employed.
If the answer to question 1 is "yes" and the answer to question 2 is "no," the next question is:
3. Last week, did you do any unpaid work in the family business or farm? 
For those who reply "no" to both questions 2 and 3, the next key questions used to determine
employment status are:
4. Last week, (in addition to the business) did you have a job, either full or part time? Include any
job from which you were temporarily absent.
5. Last week, were you on layoff from a job?
6. What was the main reason you were absent from work last week? 
For those who respond "yes" to question 5 about being on layoff, the following questions are asked:
7. Has your employer given you a date to return to work? 
If "no," the next question is:
8. Have you been given any indication that you will be recalled to work within the next 6 months? 
If the responses to either question 7 or 8 indicate that the person expects to be recalled from layoff,
he or she is counted as unemployed.
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 Major questions determine employment status, cont’d.

For those reported as having no job or business from which they were absent or on layoff,
the next question is:
9. Have you been doing anything to find work during the last 4 weeks?
For those who say "yes," the next question is:
10.What are all of the things you have done to find work during the last 4 weeks?
If an active method of looking for work, such as those listed at the beginning of this
section, is mentioned, the following question is asked:
11.Last week, could you have started a job if one had been offered? 
If there is no reason, except temporary illness, that the person could not take a job other
than temporary illness, he or she is considered to be not only looking but also available
for work and is counted as unemployed.
If the person is neither employed nor unemployed, he or she is not in the labor force.

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Steps 3&4: Who not in the labor force wants a job?
• Questions asked of persons not in the labor force (NLF) about their interest in work:
1. Do you currently want a job, either full or part time?
2. What is the main reason you were not looking for work during the last 4 weeks?
3. Did you look for work at any time during the last 12 months?
4. Last week, could you have started a job if one had been offered?

• Step 3: Marginally attached to the labor force people are NLF (not currently looking for work and
therefore not counted as unemployed), but who nevertheless have demonstrated some degree of labor
force attachment. They:
• Currently want a job
• Have looked for work in the last 12 months (or since they last worked if they worked within the last 12 months), and
• Are available for work.

• Step 4: Discouraged workers are a subset of the marginally attached. They

say they are not currently looking for work for one of the following reasons:
• They believe no job is available to them in their line of work or area.
• They had previously been unable to find work.
• They lack the necessary schooling, training, skills, or experience.
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• Employers think they are too young or too old, or
 Uses and users of the
unemployment rate

• Date recessions (National Bureau of Economic

Research Business Cycle Dating Committee)
• Monetary policy (Federal
Reserve System)
• Extend Unemployment Insur-
ance benefits (Congress)
• Allocate Employment and
Training grants (Department
of Labor)
• Guide decisions
(firms and individuals)

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 What are good data?
ccurate. . . Getting it right

bjective. . . Free from bias

elevant. . . Information you can use

imely. . . Getting it out quickly

ccessible. . . Meeting you where you are

National stats are a pure public good.

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Just the facts,
for everyone

• Is the glass half full or

half empty?
– It is a 12 oz. glass with
6 oz. of liquid.

• Equal access to data

for all users

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Resources
• BLS—www.BLS.GOV
• Handbook of Methods
• Publications
• Staff (email or 1-202-691-5200)
• Aggregate data: www.bls.gov
• CPS micro data: https://cps.ipums.org/cps/

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Importance of trust and independence
• Public trust critical for mission success
• Promotes data use
• Promotes feedback and participation
• Protects independence
• Independence critical for trust
• Avoids appearance of bias
• Protects against interference
• To build trust and independence
• Structure and legal protections
• Transparency, expertise, quality control, and professionalism
• Continuous modernization and best practices

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Statistical infrastructure—Integrity protection
• Independence from policy and politics
• Supply information
• Do not make policy or conduct enforcement
• Privacy/confidentiality
• Protect respondents in accordance with law
• Pre-release security
• Equal access to all at time of release and after
• No opportunity for manipulation or front-running
• Explicit pre-release access MOUs for senior policymakers

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