January 14, 2021

Unemployment Remains High As Labor Market Stalls

New data from the Bureau of Labor Statistics (BLS) show that the unemployment rate was unchanged at 6.7 percent in December. The current unemployment rate remains high compared to its pre-pandemic level of 3.5 percent, and the increase in unemployment during the pandemic has been particularly sharp for non-white workers.

The unemployment rate for December remains high relative to its pre-pandemic level


In December, about 140,000 jobs disappeared as job losses in the leisure and hospitality industry were only partially offset by job gains elsewhere. BLS notes that three-quarters of the losses in the leisure and hospitality sector came from individuals employed in food service or at drinking places. The trade, transportation, and utilities sector had the largest number of gains, mostly from retail jobs.

In December, job losses in leisure and hospitality more than offset job gains in other areas of the economy


The unemployment rate does not tell the whole story

A large number of workers continue to file for unemployment compensation. In the week that ended on January 2, there were 787,000 new claims (such data are released on a weekly basis). That continues the trend of the past 19 weeks, during which claims have hovered between 700,000 and 900,000 per week.

Claims for regular unemployment insurance remain high


Labor market conditions remain more difficult for non-white workers. The unemployment rate for white workers increased by 2.1 percentage points from March to December; meanwhile, the increases for Black and Hispanic workers were 3.1 and 3.3 percentage points over that period, respectively.

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


Standard unemployment rates do not capture all of the negative effects that the coronavirus pandemic is having on the labor market. For example, the overall unemployment rate would be 7.9 percent if it included people who have stopped looking for work during the past four weeks. (The headline unemployment rate does not count those people as unemployed because they are considered outside of the labor force.) And adding the 6.2 million people that are working part time despite desiring full-time work would bring the rate to 11.7 percent. In other words, about one in nine American workers are currently affected by the ongoing downturn in the labor market, and not all of those individuals are included in the headline unemployment rate of 6.7 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 lower because fewer people are working. Also, payments for unemployment compensation and other safety net programs will remain relatively high, in part as a result of recent legislation to continue certain unemployment benefits. Legislation to provide relief to individuals and businesses from the pandemic is projected to add about $3.5 trillion to the cumulative deficit from 2020 to 2030. 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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