The U.S. economy is in trouble, and today’s staggering unemployment numbers only tell part of the story. More than 27 million people stopped working between March and April, but over a third of them are not included in the official unemployment rate of 14.7 percent.
Millions have been pushed into part-time hours, or want a job but aren’t currently looking for one. Taking these people into account, 26.4 percent of American workers are employed below their capacity.
The official unemployment rate only looks at the labor force: People who are currently working, who have been “temporarily” laid off but expect to be recalled to their jobs or who are actively seeking work. In ordinary times, this calculation makes sense. Retired people or stay-at-home parents shouldn’t count among America’s unemployed.
But these are not ordinary times. During the pandemic, many people have stopped looking for work. They may not feel safe working, or they are discouraged by the lack of jobs available during stay-at-home orders. 9.5 million Americans who worked in March exited the labor force in May, according to this month’s job report. That’s twice the number that went from employed to out of the labor force in January.
Most people who leave the labor force want to return to work at some point. The Bureau of Labor Statistics collects information about people who are not in the labor force but want a job. That group jumped by 4.4 million between the March and April jobs report. If you added these Americans to the official unemployment rate, you’d get a new rate as high as 19.8 percent.
But for millions of workers, keeping their job didn’t mean avoiding hardship. The number of people working part-time nearly doubled, from 5.8 million in the March report to 10.7 million in the April report. Every month some workers choose to go part-time, but this trend was driven by those who had their hours cut by their employer or were unable to find a full-time job.
Working hours dropped more in some industries than others. Manufacturing workers dropped to an average of 38.3 hours per week, down from 40.4 in March. That may seem like a small drop, but in a typical jobs report, the average hours worked changes by about six minutes from the previous month.
It’s by far the largest drop in hours in manufacturing since the Bureau of Labor Statistics began tracking average hours in 2006. The construction and wholesale trade industries also saw large drops in weekly working hours.
Henry Farber, an economist at Princeton University, explained that cutting hours could save on hiring and training down the road. “Many employers are laying people off reluctantly and expecting to bring them back,” Farber said. "It’s expensive to hire and train new workers, and the best way to stay attached to your workers is cut hours but keep them on the payroll.”
On the other hand, the cost of health insurance may push employers to cut jobs, rather than hours. “The fact that we tie health insurance to work complicates the labor market in all kinds of ways,” Farber said.
So if you take the official unemployment figure, add in people who want a job but are not looking for one, and then include everyone who has been pushed into part-time work, you could say that 26.4 percent of people lost work or work hours in April. More than one in four workers has been hit by the coronavirus fallout.
Even these measures don’t capture the breadth of economic pain. There are millions more Americans who don’t earn paychecks on their own — like stay-at-home parents — but are just as affected by losses in household income. An entire generation of new workers has seen their education disrupted.
There is still a long way to go before the economy recovers. While many states are starting to reopen, the number of daily deaths from the virus has not dropped off yet. April is the first jobs report to truly capture the scope of the economic crisis, but it is just the first of many.
Kevin Uhrmacher and Tim Meko contributed to this report.
