Why Top Economists Are Citing a Higher-Than-Reported Jobless Rate
The official rate stood at 6.3% in January, but using an expanded metric, Fed and Treasury officials say it’s closer to 10%.
By Jeanna Smialek
America’s official unemployment rate has declined sharply after rocketing up last year, but top government economic officials are increasingly citing a different figure — one that puts the jobless rate at nearly 10 percent, well above its official 6.3 percent reading and roughly matching its 2009 peak.
That emphasis on an alternative statistic, espoused by leaders including Federal Reserve Chair Jerome H. Powell and Treasury Secretary Janet Yellen, underlines both the very unusual nature of the coronavirus shock and a long-running shift in the way that economists think about weakness in the labor market.
The Bureau of Labor Statistics tallies up how many Americans are actively looking for work or are on temporary layoff midway through each month. That number, taken as a share of the civilian labor force, is reported as the official unemployment rate.
But economists have worried for years that by relying on the headline rate, they are ignoring people they shouldn’t, including would-be employees who are not actively applying to work because they are discouraged or because they are waiting for the right opportunity. Looking at a more comprehensive slate of labor market measures — not just the jobless rate — came into style in a big way after the recession that stretched from 2007 to 2009.
The current conversation goes a step further. Key policymakers are all but ditching the headline unemployment rate as a reference point amid the pandemic, rather than just downplaying its comprehensiveness. That highlights the unique challenges of measuring the labor market hit from coronavirus, and it suggests policymakers will probably be hesitant to declare victory just because the job market looks healed on the surface.
“We have an unemployment rate that, if properly measured in some sense, is really close to 10 percent,” Ms. Yellen said on CNBC Thursday. A week earlier, Mr. Powell cited the same figure in a speech about lingering labor market damage.
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