The U.S. unemployment rate soared to 14.7% in April, but the headline unemployment number might not tell the whole story for how deeply the novel coronavirus has hurt the labor market.
On Friday, the Bureau of Labor Statistics reported that the unemployment rate rose to the highest level on record since the monthly data collection began in 1948.
The 14.7% figure comes from the BLS’s measurement known as “U-3 unemployment,” which presents the total amount of unemployed people as a percent of the civilian labor force.
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The BLS defines “unemployed people” as people who do not have a job but are currently looking for one. That definition presents unique challenges in capturing job loss among the millions of Americans who lost their jobs and obviously still want one.
The BLS has other classifications of labor underutilization not counted in U-3 unemployment:
Marginally attached: People who are not working and not looking for work, but indicate that they want and are available for a job
Part-time: People who want full-time work but have had to settle for a part-time schedule of less than 35 hours a week
These two groups likely constitute a large amount of workers pushed to the sidelines in the pandemic. People who had been abruptly laid off are likely to want a job when the recovery comes, but in the meantime are not actively searching for a job (for safety reasons or because there are no jobs available).
Many others may have been former full-time employees who were forced to take on reduced work schedules, in which case they would not have been counted as an “unemployed” person under U-3 unemployment.
The BLS has an alternate unemployment measure called “U-6 unemployment,” which includes marginally attached people and part-time workers to the base of unemployed workers.
For April, the U-6 unemployment rate was 22.8%, an eight percentage point difference from the U-3 and U-6 rate.
Both the U-3 and the U-6 unemployment rate could still understate the true unemployment rate because of a measurement error that may have defined furloughed workers as “employed.”
Economists have warned that the April unemployment rate is unlikely to be the peak. St. Louis Fed President James Bullard told Yahoo Finance May 11 that the unemployment rate will likely rise further.
Brian Cheung is a reporter at Yahoo Finance and Valentina Caval is a producer.
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