[Updated March 27 to show the relationship between the percentage of employees layed off in California, Connecticut, and Oregon.]
The March unemployment rate will be very high, but nowhere near the figures being bandied about on Wall Street. My forecast is 6.0%. Read on for my logic. For anyone interested in the gruesome number-crunching, here’s a woefully undocumented Excel workbook. I will field questions on request.
By my calculations, about 3.3 million jobs were lost during the first week of the shutdown. Those jobs were lost in the three states that shut down during the week when the BLS Household Survey was conducted: California, Connecticut, and Oregon.[1]
Here’s the methodology. The BLS survey always is done during the week containing the 19th of the month. That week was March 16 through 20. California shut down March 19 while Connecticut and Oregon followed on March 20. Therefore, California lost 2/5 of the work week while the other two lost 1/5 of the week. Multiplying those fractions by private employment in each state tells us how many would be unemployed if every single private business had shut down.[2]
Of course, that was not the case. I arbitrarily assumed half of businesses were shut. Hence the 3.266 million job loss that will be reported in the March unemployment statistics scheduled for release April 3. The graph below shows the rellationship between the percentage of employees layed off and the national unemployment rate. Even if all employees were layed off on the dates the shutdowns went into effect, the reported unemployment rate would still be 8 percent.
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In context, January 2020 saw 156.99 million employed and 6.5 million unemployed. The U.S. labor force, the sum of those two numbers, was 163.5 million. The unemployment rate was 6.5/163.5 or 4.0%. That matches the BLS figure for January.
Using the figures above the reported unemployment rate for March should be 6.0 percent. That figure will be much higher in April.
- The states were chosen based on a close reading of an article in USA Today. Grace Hauck and Lorenzo Reyes, March 25, 2020. “Coronavirus lockdowns: These states are ordering residents to stay home or shelter in place.” Available at https://www.usatoday.com/story/news/nation/2020/03/21/coronavirus-lockdown-orders-shelter-place-stay-home-state-list/2891193001/. Accessed March 26, 2020. ↑
- U.S. Bureau of Labor Statistics, State Employment data. I used not seasonally adjusted data for January, 2020 (the latest available). Available at https://www.bls.gov/sae/data/home.htm. Accessed March 26, 2020. ↑
