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Jason Furman, Wilson Powell III



Articles by Jason Furman, Wilson Powell III

US unemployment remains worse than it seems as millions still out of the labor force

15 hours ago

The labor market improved in February 2021 as employers added 379,000 jobs, leaving the economy at 11.9 million jobs below its pre-pandemic trend. At the same time the unemployment rate fell to 6.2 percent. Throughout the pandemic the official unemployment rate has been kept down by a misclassification error and the unusually large withdrawal of millions of people from the workforce. Our estimate of the realistic unemployment rate for February was 8.2 percent, a concept that adjusts for the unusually large decline in participation as well as changes in demography and is designed to be historically comparable to the official unemployment rate, which reached a maximum of 10.0 percent in the 2007–09 financial crisis. Another concept, the fixed participation rate unemployment rate, cited by

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Unemployment continues to fall but workers still not returning to the labor force

29 days ago

The labor market was essentially unchanged at the start of 2021 as employers added 49,000 jobs in January. Overall, the economy is 11.6 million jobs below its pre-pandemic trend with the unemployment rate elevated and the employment rate having fallen even more as millions of people have left the labor force. Unusually, while the unemployment rate has fallen steadily from 11.1 percent in June 2020 to 6.3 percent this past month, this has not been accompanied by a return of people to the workforce—as the labor force participation rate has been essentially unchanged at 61.4 percent for the last seven months. As a result the realistic unemployment rate, which is more comparable to historical numbers for the unemployment rate, stood at a very high 8.3 percent in January.
The realistic and full

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What the US GDP data tell us about 2020

January 28, 2021

The US economy contracted 3.5 percent on an annual basis in 2020, the largest contraction for any full year since the demobilization from World War II in 1946. The large decline in annual GDP reflects the very low amount of economic activity that took place in the second quarter. With the relatively rapid rebound in the second half of the year, the economy was down 2.5 percent from the fourth quarter of 2019 to the fourth quarter of 2020, among the worst four-quarter contractions in the postwar period but somewhat smaller than the worst period in the global financial crisis.
In contrast, disposable personal income (which subtracts taxes paid and adds government benefits received), experienced the fastest annual growth since 1984, fueled by supplements to unemployment insurance, stimulus

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Progress on US jobs reverses in December as labor market remains in bad shape

January 8, 2021

The US economy lost 9 million jobs in 2020, the second worst year since 1940 for job loss on a percentage basis. Overall, the unemployment rate averaged 8.1 percent, the seventh worst year since 1948. That the coronavirus pandemic resulted in merely a bad recession instead of an unprecedented depression, as many feared in the spring, is in large part due to the massive fiscal and monetary policy response to the crisis.
As 2020 ended, continued progress on jobs reversed as the economy lost 140,000 jobs in December—even as the economy remains 11.5 million jobs short of its prepandemic trend. More concerning, some of the underlying aspects of the labor market remained bad:
The full recall unemployment rate has risen since the summer and was 7.0 percent in December. This is a construct that

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US unemployment situation worsens in November

December 4, 2020

The US economy added 245,000 jobs in November, continuing the slower pace seen in recent months—even as the economy remains 10 million jobs short of its February peak and 11 million short of trend. And while the official unemployment fell from 6.9 percent in October to 6.7 percent in November, the underlying employment situation deteriorated as the labor force participation rate and employment-population ratio both fell.
As in prior months of the pandemic, the official unemployment rate continues to understate the unemployment rate from a historically-comparable perspective because it counts an extra 629,000 people who were “not at work for other reasons” as employed (the so-called “misclassification error”) and also because 4.1 million workers have left the labor force since February, 2.5

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US labor market improves, but further progress will be harder

November 6, 2020

The US economy added 638,000 jobs in October, a substantial increase but continuing the slower pace seen in recent months—even as the economy remains 10 million jobs short of its February peak. At the same time, the number of workers who reported being on temporary layoff fell by another 1.4 million, but with only 2.4 million excess temporarily laid-off workers, there is little additional room for progress here. At the same time the number of workers who were unemployed for other reasons was essentially flat, suggesting a substantial acceleration of labor market progress could be more challenging.
These job gains led the official unemployment rate to fall from 7.9 percent in September to 6.9 percent in October, faster than the decline in September. As in prior months of the pandemic, the

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Challenge facing US labor market worsened in September even as the headline numbers improved

October 2, 2020

The US economy added 661,000 jobs in September, a substantial increase but much slower than the increases in recent months. At the same time, the number of workers who reported being on temporary layoff fell by 1.5 million, while the number of workers who were unemployed for other reasons rose. This will increase the challenge of future labor market recovery.
These job gains led the official unemployment rate to fall from 8.4 percent in August to 7.9 percent in September. As in prior months of the pandemic, the official unemployment rate continues to understate the unemployment rate from a historically-comparable perspective because it counts an extra 773,000 people who were “not at work for other reasons” as employed (the so-called “misclassification error”) and also because 4.4 million

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US unemployment rate falls in August as many workers on temporary layoffs return to work

September 4, 2020

The official unemployment rate fell to 8.4 percent in August from 10.2 in July, marking the first time the unemployment rate has been below 10 percent since March. As in prior months of the pandemic, the official unemployment rate continues to understate the unemployment rate from a historically-comparable perspective because it counts an extra 1.1 million people who were "not at work for other reasons" as employed (the so-called "misclassification error") and also because 3.7 million people have left the labor force since February, more than would be expected even given this large increase in unemployment. Adjusting for these factors our "realistic unemployment rate" was 9.9 percent in August, falling faster than the official unemployment rate as the misclassification error continued to

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US unemployment rate falls again but still little progress for people who have not been temporarily furloughed from their jobs

August 7, 2020

The official unemployment rate continued to fall in July from 11.1 in June to 10.2, a slowdown from the improvement in May and June. As in prior months of the pandemic, the official unemployment rate continues to understate the unemployment rate from a historically-comparable perspective because it counts an extra 1.4 million people who were "not at work for other reasons" as employed (the so-called "misclassification error") and also because 4.7 million people have left the labor force since February, more than would be expected even given this large increase in unemployment. Adjusting for these factors our "realistic unemployment rate" was 12.0 percent in July, falling slightly faster than the official unemployment rate. The small reduction in this gap reflects continued improvement in

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US unemployment rate falls again but little progress after accounting for recalls from temporary layoffs

July 2, 2020

The official unemployment rate continued to fall in June from 13.3 in May to 11.1. As in prior months of the pandemic, the official unemployment rate continues to understate the unemployment rate from a historically-comparable perspective because it counts an extra 2.0 million people who were "not at work for other reasons" as employed (the so-called "misclassification error") and also because 4.6 million people have left the labor force since February, more than would be expected even conditional on this large increase in unemployment. Adjusting for these factors our "realistic unemployment rate" was 13.0 percent in June, falling almost twice as fast as the official unemployment rate. As some states slow or partially reverse their reopening plans as virus cases rise, the ability to

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The US unemployment rate is higher than it looks—and is still high if all furloughed workers returned

June 5, 2020

The official unemployment rate rose from 3.5 percent in February 2020 to 13.3 percent in May (down from its value in April). Even this very large official increase understates the increase in the unemployment rate from a historically-comparable perspective because it counts an extra 4.9 million people who were "not at work for other reasons" as employed and also because 6.3 million people have left the labor force since February, more than would be expected even conditional on this large increase in unemployment. Adjusting for these factors our "realistic unemployment rate" was 17.1 percent in May, down from the April value but still higher than any other unemployment rate in over 70 years.
In total, an additional 14.5 million of the unemployed reported being on temporary layoff, many of

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Why Have Employment Rates in the United States Lagged Other Countries?

June 6, 2018

From 2007 to 2017 the fraction of Americans employed fell by 2.9 percentage points. As we discussed in a previous blog post coauthored with Harris Eppsteiner, the aging population has been driving the decline in the US employment-population ratio, or employment rate. (The employment-population ratio, or the employment rate, is the fraction of the overall population working, and as such it reflects a combination of the labor force participation rate and the unemployment rate.)
In contrast, employment rates actually rose in 13 of 29 advanced economies from 2007 to 2017, even though they also faced a similar headwind of an aging population. Moreover, after adjusting for changes in the age-sex structure within each country, employment rates rose in 21 of 29 advanced economies during this

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