Unemployment rate starts to decline in May 2020 after shooting up in April.
The headline unemployment rate declined to 13.3% from 14.7% in April. Rates for both months are a dramatic increase from the 3.5% rate in February.
The only way I can square this data with the massive volume of new unemployment claims is that a lot of people are getting new jobs after being furloughed. That is the only way the U3 is not above 20%.
So, my tentative guess is the economy is actually starting to recover, in spite of efforts of multiple governors to keep the economy in their states shut down.
Misclassification error in data understates unemployment
A new phenomenon in the age of shutdown is arising from the way the data is accumulated. The unemployment rate is determined by a large survey.
Turns out people are answering the question of their unemployment status as “employed but absent from work.” In normal times, that means a person is on vacation, thus actually employed.
In this shattered economy that means you got laid off or furloughed but are still getting paid by your employer or perhaps highly enhanced unemployment. People in that category are actually unemployed but are counted in the statistical data as employed.
