On July 2, the Bureau of Labor Statistics (BLS) released data on unemployment figures for the month of June. Those numbers showed that the economy gained 4.8 million jobs last month, lowering the unemployment rate from 13.3% to 11.1%.
The report had some bad news in that it showed that the US had only recovered about a third of total job losses since the coronavirus pandemic occurred. And it showed that permanent job losses for the month reached 2.9 million, a figure that increased by approximately 500,000 jobs from the previous month.
But the report can also be considered good news, as it is a clear sign of some economic recovery in the country. And in fact, this news may even be best from what appears on the surface for a key reason: There was a problem with the way data was collected last month, which the BLS was seeking to correct with this new round of job numbers.
Here is the problem and an explanation of why this month’s report could be an even better indicator of recovery.
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A key change that could hide the truth about unemployment trends.
When the Bureau of Labor Statistics collects unemployment data, the information is obtained from both business reports and a household survey.
When households were surveyed, individuals were classified in different ways, including employed, unemployed, employed but absent from work or not in the workforce.
The Bureau of Labor Statistics instructed those who conducted the household survey in May to classify employees who were absent from work due to COVID-19-related closings as unemployed. However, the BLS acknowledges that there was a clear misclassification error, and many dismissed workers were reported as employees but absent from work, even when in fact they were temporarily fired. If the number of employed workers absent from work for other reasons had been the same as in a typical May month, the unemployment numbers would have been approximately three percentage points higher than the reported number.
BLS indicated last month that it would take steps to correct this misclassification error and ensure that people who were classified as employed but absent from work are correctly registered as unemployed in June if their employer fired them. And, in this month’s report, the agency said “the degree of misclassification decreased significantly in June.” In fact, this month, BLS indicates that if the number of workers classified as absent for other reasons had been the same as in a typical June, the unemployment rate would have been approximately one percentage point higher than the reported number, at most: – and that “probably overstates the size of the misclassification error.”
That means some workers listed as employees in May were probably reclassified as unemployed in this recently released June report. Unfortunately, because of that, the new data doesn’t show with 100% accuracy how many new unemployed workers there are. After all, those people no longer had a job before, even if the data didn’t show it.
The data collection error in May was substantial enough that the unemployment rate, which was reported at 13.3%, could actually have been as high as 16.4%. Since correcting this error means that millions of people who were registered as employees last month likely moved to the unemployed column, it is even more impressive that the unemployment rate has decreased substantially. It means that enough people would have had to have been rehired to compensate those people and still shows a drop in jobless numbers.
The stock market and its hopes of another stimulus control could be affected
Although the June data is not necessarily an accurate reflection of the number of unemployed Americans, it is one of the main sources of information that politicians and investors rely on to make their decisions.
Unfortunately, since it may not accurately represent the full extent of the recovery that has taken place, the stock market may not get as big of a hit as it should, and lawmakers may feel they need to take steps to help speed up the pace. of economic improvement Even more.
If you hope to pick up stocks at bargain prices, it may be good news that the improvement in the unemployment rate is being underestimated, as this could give you an opportunity to buy stocks at a slight discount if some investors rely solely on June for the numbers not. They accurately assess the speed at which the economy is recovering.
And if you expect more stimulus money, the mistake may actually work in your favor since the decline in the unemployment rate is not as great as it would have been otherwise. Of course, since the jobs report suggests a strong recovery even with this possible error, it still significantly reduced the chances of another stimulus check.
If you are still experiencing difficulties, you should contact your representatives to inform them so that they are aware of your situation and can take this into account when deciding how to proceed with another COVID-19 stimulus verification. This may be especially important, because while the June figures show that the economy is recovering at a healthy rate, some states have begun to stop their reopens or even begin to close businesses again, so the July figures may not be as positive when you get the key data reported next month.
