Back in April, we saw the highest unemployment rate since the Great Depression, 14.7%. And, like the pandemic, it came out of nowhere. Just one month earlier the unemployment rate was 4.4%.
A high number was expected for April, as parts of the nation were shocked and went into lockdown. It is now half a year later, and while the numbers are improved, things are still bad. The unemployment rate for October was 6.9%. The unemployment rate was last this high in November 2013, as the US, and the whole world, was recovering from the Great Recession. Not including the Great Recession, the last time it was above 6.9% was July 1993.
It has been a while since this many people have been unemployed. And while we are lucky to have a history of low unemployment levels, that does not do much to help those suffering in the present.
Disproportionate Statistics
A deeper dive into October’s unemployment report provided by the Bureau of Labor Statistics is revealing in times like these.
Age and Sex
Which age groups are hit the hardest? Those that are the youngest. The table below shows the increase in the unemployment rate from October 2019 to October 2020 by age group.
| Age | Oct. 2019 Rate | Oct. 2020 Rate | Difference |
|---|---|---|---|
| 20 to 24 yrs | 6.2% | 10.8% | 4.6 |
| 25 to 34 yrs | 3.7% | 7.3% | 3.6 |
| 35 to 44 yrs | 2.6% | 5.8% | 3.2 |
| 45 to 54 yrs | 2.6% | 6.0% | 3.4 |
| 55 yrs and up | 2.6% | 5.4% | 2.8 |
In October 2019, men had an unemployment rate of 3.6% and women had a rate of 3.5%. In October 2020, men have a rate of 7.0% and women have a rate of 6.7%.
Employment-Population Ratio
- In Oct. 2019 the civilian non-institutional population was 259.8 million. It increased by less than 1% to 260.9 million for Oct. 2020.
- The civilian labor force dropped from 164.4 million in Oct. 2019 to 160.7 million in Oct. 2020.
- The number of civilians not in the labor force has increased from 95.4 million in Oct. 2019 to 100.1 million in Oct. 2020.
Those not in the labor force are not counted against unemployment numbers. From Oct. 2019 to Oct. 2020 the number of unemployed jumped from 5.9 million to 11.1 million.
The number of people not employed and the number of people no longer in the labor force combined is 9.9 million people. That is a lot of people no longer working. The employment to population ratio has dropped from 61.0% to 57.4% in one year.
The Natural Unemployment Rate
Depending on who you ask, there is a different number for the natural unemployment rate. It is generally considered between 3.5% and 5% is the ideal unemployment rate. Some would even say the ideal rate is zero. But most would agree the natural unemployment rate is around 4%.
Prior to the pandemic, the US was pushing the lower limits of the natural unemployment rate. In March of 2018, the unemployment rate hit 4.0%. It stayed at or below this number until March 2020. At its lowest levels, it hit 3.5%.
It was a great market for those looking for jobs. It was not such a good market for companies looking to hire workers for cheap or have an applicant pool with many candidates. People were able to find new jobs easily and could get paid handsomely for switching, as companies had less supply of available workers.
While the idea of everyone working sounds great, there are some downsides to having too low an unemployment rate. An unemployment rate lower than the natural unemployment rate can overheat the economy. This can result in inflation and reduced productivity. Productivity is reduced because the new job created does not create enough productivity to cover its cost.
Final Thoughts
Lowering the unemployment rate is great. People can go back to work. Families are less worried. Life can get back to normal. But for all the progress we have made the past several months, we are still at high levels of unemployment and in a shaky economy. And with the surge of cases recently, things may get worse before they get better.
For all those who have lost their job because of the pandemic, things will get better in time, hopefully, sooner rather than later.
Data from U.S. Bureau of Labor Statistics.