The Corner

Economy & Business

The Unemployment Picture Is Terrible, but Not That Terrible

Alberto Mendoza checks a website to apply for unemployment benefits outside of the Workforce Solutions for South Texas offices in Laredo, Texas, March 20, 2020. (Veronica G. Cardenas/Reuters)

This morning, the United States Department of Labor released this week’s estimate of U.S. initial jobless claims for the week ending May 30, 2020. The report contained a glimmer of hope: While initial claims are high, this is the ninth straight week that weekly initial claims have declined. Now, the total number of initial jobless claims made since mid-March and the start of sledgehammer lockdowns across the U.S. is a stunning 42.6 million.

But, as my colleague Jack Tatom — a Fellow at the Johns Hopkins Institute for Applied Economics, Global Health, and the Study of Business Enterprise, which I founded in 1995 and co-direct — notes, these headline estimates for unemployment are terribly misleading —roughly double the more accurate account of unemployment. How could this be? To start, unemployment data are highly politically charged and draped with emotions, insinuations, and assertions that make it very hard to differentiate fact from fiction.

The widely reported headline estimates are calculated by summing the number of new weekly initial claims for unemployment and the total from the previous week. But, according to the DOL, when initial claims are filed, claimants are merely requesting a determination on their eligibility for unemployment benefits after separating with their employer. So, many of those who file an initial jobless claim make an invalid request or are hired somewhere else before they even get a chance to claim any weekly benefits at all.

The weekly DOL report also releases the number of “continued claims for unemployment.” This is made up of those people who were unemployed for at least one week and who file a continued claim to claim the unemployment benefits that are owed to them. Or, in other words, it is the current number of insured, unemployed workers that are claiming unemployment benefits.

Continued claims data, which are released with a one-week delay, paint a much more accurate picture of United States unemployment. Unlike initial claims, continued claims data eliminate many of the mistakes and invalid requests made by those filing initial claims, errors made by workers on whether or not they are actually considered unemployed, and errors associated with workers that found new jobs or are back at work.

By looking at continued claims (unadjusted), the number of unemployed people since mid-March has seen a stunning increase of 17.2 million as of the week ending May 23, 2020. But that’s nothing compared to the headline number of total initial jobless claims made, which soared by about 40.8 million over the same period. So, the total number of continued claims in the U.S., while enormous, is less than half — only 42 percent — of the widely reported headline figures that the press trots out with great delight each week.

Although the rise in unemployment in the U.S. since the dawn of the coronavirus pandemic is clearly huge, continued claims data make it clear that the scary headline figures that are widely reported each week are far from the real story.

Steve H. Hanke is a professor of applied economics at the Johns Hopkins University in Baltimore. He is a senior fellow and the director of the Troubled Currencies Project at the Cato Institute in Washington, D.C.

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