Last week, the Bureau of Labor Statistics (BLS) released their monthly unemployment report. It was much better than expected, showing unemployment dropped 1.4% instead of increasing 4-5%. I wrote “Something Smells” about this. After all, how could 30 million workers be receiving unemployment benefits, when the BLS said only 20 million workers were unemployed?
Later that day, the President used the report to claim we are back on the road to normalizing our economy. Since the report was so different than expectations, my Democratic friends suspected the “numbers were cooked” by the Trump Administration. The Democrats were wrong! It is reminiscent of the 2015-16 period when about 200 thousand jobs were being created every single month. My Republican friends suspected the “numbers were cooked” by the Obama Administration. The Republicans were wrong!
Since then, we have learned the BLS made a “miscalculation error.” In fairness to them, they never had to analyze such large swings in unemployment, especially against a background of massive fiscal policy, such as the Payroll Protection Program (PPP). Normally, people who are unemployed but not looking for a job are NOT counted as unemployed. PPP was instituted to protect workers temporarily who would be recalled by their employers. Assuming they would be recalled, those workers were not looking for a job. If they had been counted correctly, the unemployment rate would have easily been over 16%, which was closer what was expected. It is best to dismiss last week’s report as a fluke, which makes next month’s report that much more important.
Of course, if you’re looking for something to worry about, the University of Chicago estimates that 42% of workers furloughed will never be recalled by their employers. Do those furloughed workers realize that?