Note to Congress: Look Behind the Jobs Data

Blog Post
Thursday, July 16, 2020

The Labor Department released new data today on initial unemployment claims by laid-off workers. For the week ending July 11, new claims dropped 10,000 to 1.3 million, extending the downward trend from the peak of 6.9 million in late March. Continuing claims for the week ending July 4 totaled 17.3 million, down more than 700,000 from the prior week.

Jobs Data Chart 1

Interestingly, economists and the media are interpreting the claims data in one of two ways: either this was the 15th straight week initial claims fell (good news) or this was the 16th straight week that initial claims exceeded 1 million (bad news). This follows recent commentary on the topline unemployment rate for June: the unemployment rate has fallen two months in a row (good news) or the unemployment rate is still shockingly high (bad news). 

Jobs Data Chart 2

Humorist Mark Twain once popularized the saying, “There are three kinds of lies: lies, damned lies, and statistics.” Today’s news clearly demonstrates that economic data can – and will be – interpreted in many ways. 

Because of this, as Congress debates a fifth pandemic relief package, including the path forward on important support programs such as the $600 per week supplementary-unemployment insurance, the Paycheck Protection Program, and recovery rebates for individuals and households, it is important that they first pursue a robust examination of labor market conditions. Context matters and headline numbers often fail to reflect the complete picture.

Economists across the political spectrum agree that the economic recovery will be uneven. Relying on the national unemployment rate to drive policy decisions on pandemic unemployment insurance completely ignores that labor market conditions in states hard hit by the virus are significantly different from states that have been relatively unscathed – and will be for some time.

Additional labor market data should be considered: regional unemployment, unemployment among working age adults, and unemployment in industries directly affected by the pandemic (dining, leisure, retail, education, etc.). 

The headline unemployment rate is known to have shortcomings – for example, it does not capture the discouraged worker effect – so lawmakers should augment their understanding of employment conditions by following statistics that do

By construction, jobs data is backward looking, but lawmakers need to craft policy solutions that look forward. The effect of exponential viral outbreaks in many southern and western states has not yet manifested in rising jobless claims, but as states begin to rollback phased re-openings, it would be prudent for Congress to look ahead and ponder a near future where joblessness climbs.