Jobs Report Error Lowered Unemployment Rate by Three Percentage Points

Jobs Report

Written By ESR News Blog Editor Thomas Ahearn

The May 2020 jobs report that showed the United States economy added a surprising 2.5 million jobs while the unemployment rate declined to 13.3 percent despite the effects of the Coronavirus (COVID-19) pandemic that caused a record loss of 20.5 million jobs in April 2020 also contained a “misclassification error” that lowered the unemployment rate. If all workers were properly classified, “the overall unemployment rate would have been about 3 percentage points higher than reported,” according to the U.S. Bureau of Labor Statistics (BLS).

A note in the jobs report explained the mistake: In the household survey, individuals are classified as employed, unemployed, or not in the labor force based on their answers to a series of questions about their activities during the survey reference week (May 10th through May 16th). Workers who indicate they were not working during the entire survey reference week and expect to be recalled to their jobs should be classified as unemployed on temporary layoff. In May, a large number of persons were classified as unemployed on temporary layoff.

However, there was also a large number of workers who were classified as employed but absent from work. As was the case in March and April, household survey interviewers were instructed to classify employed persons absent from work due to coronavirus-related business closures as unemployed on temporary layoff. However, it is apparent that not all such workers were so classified. BLS and the Census Bureau are investigating why this misclassification error continues to occur and are taking additional steps to address the issue.

If the workers who were recorded as employed but absent from work due to “other reasons” (over and above the number absent for other reasons in a typical May) had been classified as unemployed on temporary layoff, the overall unemployment rate would have been about 3 percentage points higher than reported (on a not seasonally adjusted basis). However, according to usual practice, the data from the household survey are accepted as recorded. To maintain data integrity, no ad hoc actions are taken to reclassify survey responses.

The jobs report – officially titled “The Employment Situation” – is usually released on the first Friday of every month at www.bls.gov/news.release/empsit.nr0.htm. The jobs report for June 2020 will be released on Thursday, July 2, 2020, since the July 4th holiday will fall on a Saturday in 2020, and the government is observing Independence Day on Friday, July 3, 2020. More information about the May 2020 jobs report is available at www.bls.gov/cps/employment-situation-covid19-faq-may-2020.pdf.

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