Q: When is a drop in the unemployment rate bad news?
A: When people are leaving the labor force rather than going back to work.
The official monthly employment numbers for August were released last Friday by the US Bureau of Labor Statistics (BLS). Vermont’s reported unemployment rate fell from 8.3 percent in July to 4.8 percent in August.
That would normally be great news. Fewer unemployed means more people have gone back to work, right?
But that’s not what happened last month. In fact, the BLS reported that the number of employed Vermonters dropped more than 2000 between July and August. During the same period, the number of unemployed Vermonters fell by nearly 13,000.
What happened to 15,000 workers who suddenly were neither employed nor unemployed?
The answer to this question has to do with BLS definitions and one of the many quirks of this pandemic.
BLS employment statistics are taken from surveys that ask individuals about their work status. Individuals are considered to be in the labor force if they either are 1) employed or 2) unemployed, which is defined as available for and actively seeking work.
The problem is that in the interest of public health during the COVID-19 emergency individuals have been encouraged not to work, may be concerned about the safety of going to work, or cannot work because they need to care for others such as children who would normally have been in school or daycare. Yet these unemployed individuals may be receiving unemployment benefits as the state has dropped the work-search requirement.
The result is that thousands of Vermont workers do not fit the definition of unemployed because they are not actively seeking work and are no longer counted as being in the labor force.
According to Vermont Labor Commissioner, Michael Harrington: “Knowing that the actual number of Vermonters filing weekly for unemployment benefits remains much higher than the survey data, and that traditional work search requirements have been suspended, we know that the results of the household survey do not accurately reflect Vermont’s economic reality.”
Tens of thousands of Vermonters are still unemployed and need support, which is why Congress needs to reinstate federal pandemic unemployment benefits. That support should continue until a falling unemployment rate means Vermonters really are going back to work.