Jobs Rebound By 4.8 Million But Huge Headwinds Remain

Nonfarm payrolls expanded by a record 4.8 million but that leaves another 15 million to go.

The BLS Employment Report for June shows employment rose by 4.8 million and the unemployment rate fell to 11.1%

Initial Reaction

Both numbers are better than the consensus.

The Bloomberg Econoday consensus jobs estimate was +3.0 million and the unemployment rate consensus was 12.4%.

The BLS said that errors that plagued the March, April, and May reports were not as bad this month.

BLS Error Rate

As was the case in March, April, and May, household survey interviewers were instructed to classify employed persons absent from work due to temporary, coronavirus-related business closures as unemployed on temporary layoff. BLS and Census Bureau analyses of the underlying data suggest that this group still included some workers affected by the pandemic who should have been classified as unemployed on temporary layoff.

The degree of misclassification declined considerably in June. BLS and Census Bureau staff have been reviewing survey responses that might have been misclassified. The misclassification hinges on a question about the main reason people were absent from their jobs. If people who were absent due to temporary, pandemic-related closures were recorded as absent due to “other reasons,” they could have been misclassified. When interviewers record a response of “other reason,” they also add a few words describing that other reason. The review of these brief descriptions found that the share of responses that may have been misclassified was much smaller in June than in prior months. BLS and the Census Bureau are continuing to investigate the misclassification and are taking additional steps to address the issue.

If the workers who were recorded as employed but absent from work due to “other reasons” (over and above the number absent for other reasons in a typical June) had been classified as unemployed on temporary layoff, the overall unemployment rate would have been about 1 percentage point higher than reported (on a not seasonally adjusted basis). However, this represents the upper bound of our estimate of misclassification and probably overstates the size of the misclassification error. 

Add 1 percentage to the unemployment rate for a better estimate.

Job Revisions

The change in total nonfarm payroll employment for April was revised down by 100,000,  from -20.7 million to -20.8 million, and the change for May was revised up by 190,000, from +2.5 million to +2.7 million. With these revisions, employment in April and May combined was 90,000 higher than previously reported.

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