As we discussed several times in our COVID-19 career series, unemployment skyrocketed. It has stabilized to some extent as more organizations reopened. Now, with the latest surge in COVID-19 cases in the U.S., we should expect double-digit unemployment percentages to continue. Therefore, we address the true story about unemployment.
To study unemployment properly, we should look at additional factors. And not just the overall unemployment rate published by the Bureau of Labor Statistics. According to the recently-released June 2020 report, the stated unemployment rate dropped to 11.1 percent. Down from 14.7 percent during April 2020.
What Is the True Story About Unemployment?
During the pandemic, understanding the job market became more complicated. First, we must distinguish between furloughs and layoffs. In recent decades, “layoffs” became a pseudonym for “firings.” Permanent job losses for employees. For 2020, we have seen greater use of “furloughs.” It refers to temporary layoffs due to the pandemic. However, we have entered a period where some furloughs are permanent.
Second, we must note these forms of unemployment not reflected in the official numbers. Many unemployed people stop applying for benefits. Lots of employed people have received pay cuts, which affects their ability to shop. Some employed people have had hours cut. Other people who have become contract workers (with no benefits). Etc.
Here, we focus on temporary furloughs converting to permanent layoffs. With the rise in the latter, the official unemployment rate seems destined to rise.
To gain further insight, we turn to data from FiveThirtyEight:
The number of workers permanently losing jobs rose quite a bit [in June] — signaling that getting back to work won’t be easy. In April and May, 88.6 percent of job losses were “temporary.” Businesses shut down temporarily to stop the spread of COVID-19 but planned to reopen. Government loans incentivized businesses to keep employees during the closures. But in June, the share of temporary job losses fell to 78.6 percent.
“As more job losses become permanent, this recession will look more like an ordinary recession. In recent history, recovery has been a slow slog,” said Nick Bunker, the director of economic research for North America at the Indeed Hiring Lab. “That means the hopes of a quick recovery will be slimmer and slimmer.”
Furthermore, large companies such as American Airlines, AT&T, Boeing, Chevron, Hilton, Levi’s, Macy’s, Uber, United Airlines, Walgreens, and Wells Fargo already announced significant layoffs continuing into fall 2020.