November 18, 2020

The Unemployment Rate Improved Last Month — But Remains High

New data from the Bureau of Labor Statistics (BLS) show that the unemployment rate improved in October, but remains high, particularly so for non-white workers. After the unemployment rate shot up from 4.4 percent in March to 14.7 percent in April, it has dropped steadily since then — most recently from 7.9 percent in September to 6.9 percent in October.

The decline in the unemployment rate from September to October results from a decrease in the number of unemployed individuals from 12.6 million to 11.1 million, in addition to an increase in the size of the labor force from 160 million to 161 million workers. However, the current unemployment rate is still almost double the rate that existed before the pandemic began.

The unemployment rate for october continued its decline from the record level that was set in April


Job gains in September were driven by three industry sectors: leisure and hospitality; professional and business services; and trade, transportation, and utilities. The largest decline was in government employment, which occurred due to declines in temporary Census workers at the federal level and declines in the numbers of education jobs at the state and local levels.

Half of the job gains in october were in two sectors


Despite labor market improvements, the unemployment rate does not tell the whole story

Despite the improvement in the reported rate of unemployment, a large number of workers continue to file for unemployment compensation. In the week that ended on October 31, there were 751,000 new claims (such data are released on a weekly basis). That continues the trend of the past 10 weeks, during which claims have hovered between 750,000 and 900,000 per week.

Claims for regular unemployment insurance remain high


The labor market’s overall improvement in October does not change the fact that conditions remain particularly difficult for non-white workers. The unemployment rate for white workers increased by 2.0 percentage points from March to October; meanwhile, each of the other racial and ethnic categories presented by the BLS experienced an increase of 2.8 percentage points or higher over that period.

Unemployment rates across racial and ethnic groups have increased significantly during the COVID-19 pandemic


Standard unemployment rates do not fully account for the negative effects that the coronavirus pandemic is having on the labor market. After adding the workers who have stopped looking for work during the past four weeks, the overall unemployment rate increases from 6.9 percent to 8.0 percent. Adding the 6.7 million people that are working part time despite desiring full-time work brings the rate to 12.1 percent. In other words, about one-eighth of American workers are currently affected by the ongoing downturn in the labor market, and not all of those individuals are captured by the headline unemployment rate of 6.9 percent.

The official unemployment rate does not include many workers that have been affected by the COVID-19 outbreak


As the economy struggles and many people remain out of work, the federal budget will be affected in a number of ways. Income and payroll tax receipts will be at lower levels because fewer people are working. Also, payments for unemployment insurance and other safety net programs will remain relatively high, especially if lawmakers enact a continuation of certain additional unemployment benefits that expired on July 31. Legislation to provide relief to individuals and businesses from the pandemic added more than $2 trillion to the deficit in fiscal year 2020 and is projected to add about $600 billion in 2021. However, there is no reasonable alternative — providing assistance to individuals who lose their jobs, especially during a global health crisis, can save the economy from suffering even further damage.

Related: Here’s Everything Congress Has Done to Respond to the Coronavirus So Far

Image credit: Photo by John Sommers II/Getty Images

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