Due to a ‘Misclassification Error’ the Unemployment Rate Looks Like It’s Dropping Faster Than It Actually Is

On Friday, the Bureau of Labor Statistics released its official jobs report for May which reported the first drop in the unemployment rate since the pandemic began wreaking havoc on the U.S. economy. Just one problem: The number was off by 3 percentage points.

According to the Washington Post, the BLS added a note to its report identifying a “misclassification error” that put the current percentage of unemployed citizens at 13.3, which means the rate was 16.3 for May. That number was originally reported as an improvement from the 14.7 unemployment rate from April—only that number was also wrong.

In fact, the error acknowledged by the BLS—the agency that releases jobs reports every month— also occurred in the reports for March and April. April’s unemployment numbers would have been five percentage points higher than reported if the appropriate assessment standards were applied.

From the Post:

Economists say the BLS was trying to be as transparent as possible about how hard it is to collect real-time data during a pandemic. The BLS admitted that some people who should have been classified as “temporarily unemployed” during the shutdown were instead misclassified as employed but “absent” from work for “other reasons.”

The “other reason” category is normally used for people on vacation, serving jury duty or taking leave to care for a child or relative. These are typically situations where the worker decides to take leave. But in this unusual pandemic circumstance, the “other reason” category was applied to some people staying at home and waiting to be called back.

This problem started in March when there was a big jump in people claiming they were temporarily “absent” from work for “other reasons.” The BLS noticed this and flagged it right away. In March, the BLS said the unemployment rate likely should have been 5.4 percent, instead of the official 4.4 percent rate. In April, the BLS said the real unemployment rate was likely about 19.7 percent, not 14.7 percent.

All and all, 4.9 million people were falsely listed as employed in a report that indicated 2.5 million jobs were added in May.

It’s unclear why an error that has been occurring since March has yet to be fixed, but the BLS says it’s working on it.

“BLS and the Census Bureau are investigating why this misclassification error continues to occur and are taking additional steps to address the issue,” the note at the bottom of Friday’s report reads.

And lest some think that the Trump administration is fiddling with the numbers, economists and other experts reject that idea.

From the Post:

Some took this as a sign that President Trump or one of his staffers may have tinkered with the data to make it look better, especially since most forecasters predicted the unemployment rate would be close to 20 percent in May, up from 14.7 percent in April. But economists and former BLS leaders from across the political spectrum strongly dismissed that idea.

“You can 100% discount the possibility that Trump got to the BLS. Not 98% discount, not 99.9% discount, but 100% discount,” tweeted Jason Furman, the former top economist for former president Barack Obama. “BLS has 2,400 career staff of enormous integrity and one political appointee with no scope to change this number.”