White House economic adviser Kevin Hassett predicted the unemployment rate for April could be between 16% to 20% when it’s released Friday. That would be its highest level since the 1930s.
But the unemployment rate that the U.S. Bureau of Labor Statistics releases this week will significantly undercount the actual level of joblessness.
That’s because of the way the BLS numbers are compiled. Only people without jobs who are also looking for new positions are actually categorized by the BLS as unemployed and included in the jobless rate. But a Fortune-SurveyMonkey poll of 4,717 U.S. adults* between April. 25-28 finds that 17% of workers who recently lost their jobs aren’t currently looking for work.
Some laid-off workers may be waiting for the stay-at-home orders to be lifted before starting their job search. Others may prefer to stay home and receive the boosted jobless benefits at a time when a deadly pandemic is raging the country. While economists have speculated this would happen, the Fortune-SurveyMonkey poll is the first to put a figure on the share of unemployed who are being undercounted.
“With entire swaths of the economy shuttered in April, it is unrealistic to think that most laid-off workers will be actively looking for work, as there may not be anywhere to look,” wrote Dante DeAntonio, an economist at Moody’s Analytics this week.
Those receiving unemployment benefits (UI) have historically been required to search for work, DeAntonio wrote, but most states have completely eliminated those requirements during the current crisis. That makes it even less likely those receiving UI benefits will look for work and be included in the jobless rate. And the generous additional $600 weekly UI benefit provided under the CARES Act, could further disincentivize looking for work, the economist wrote.
The April unemployment rate will jump into the double digits from the 4.4% rate in March, a calculation that runs through March 13. But the May rate will be even higher, given that millions more are still filing jobless claims each week—including 3.8 million last week which is outside the reporting period for the April jobless rate.
If the nation’s 30.3 million initial jobless claims over the past six weeks were added to the already 7.1 million unemployed Americans as of March 13, it would equal more than 37 million unemployed, or a real unemployment rate of 23%.
*Methodology: The Fortune-SurveyMonkey poll was conducted among a national sample of 4,717 adults in the U.S. between April 25-28. This survey’s modeled error estimate is plus or minus 3 percentage points. The findings have been weighted for age, race, sex, education, and geography.
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