Sunday, April 26, 2020

Measuring Employment between Monthly Surveys

The Employment Situation Report by the Bureau of Labor Statistics comes only monthly.  It measures only the seven-day week (or, with the establishment survey, pay period) including the 12th of the prior month, which means that this month four very interesting weeks will be skipped and that the report on that April week will not be released until May 8.

Three data sources provide employment information on at least one of the missing four weeks, with the results shown in the chart below.  The results suggest that employment has fallen more than 20 million and perhaps as much as 36 million by April 11.  This does not begin to count employees who had their hours reduced.

One is an attempt by Bick and Blandin (2020) to imitate the BLS household survey for the week of Sunday March 29 to Saturday April 4.  They sampled 1,118 respondents, finding that employment per adult aged 18-64 was 17.8 percent below what it was in February and 17.4 percent below what it was in January.  They find that hours worked per person (including zeros for those not employed) were 27.7 percent below what they were in January and February.

Coibion, Gorodnichenko, and Weber (2020) surveyed 18,344 members of the Nielsen HomeScan panel during the days Thursday April 2 through Monday April 6.  The respondents were asked “Do you have a paid job?” which is different from the BLS questions but the same as January surveys of the Nielsen panel.  Their sample shows a 12.5 percent decline from January to April.

As a third source, I use the excess of continued UI claims for the week ending April 4 rescaled by 0.4, which is the typical ratio of continued claims to persons unemployed during the 2008-9 recession.[1]  The rescaled amount is 16.1 percent of February employment as measured by the February household survey.  This approach also offers employment estimates for the weeks before and after the week ending April 4.

Especially during the pandemic, “employment” and “unemployment” can vary significantly merely due to definitions.  Is a person on the payroll but told not to work considered employed?  The BLS knows from its experience with Federal shutdowns that surveyors and respondents frequently misclassify relative to the technical definition in the survey.  The practical classification grey areas are also presumably sensitive to question wording.  UI claims also have a grey area that presumably changes as new Federal policies increase the financial reward to unemployed rather than out of the labor force.

These measurement challenges suggest using hours worked rather than employment and using multiple data sources, which are not entirely congruent approaches because only one of the three sources measures hours worked.[2]  I therefore measure the decline in hours worked by averaging the three employment estimates and then applying the Bick-Blandin estimate of the decline in hours per employee.

Regarding initial claims versus continued claims, initial claims may not be granted due to ineligibility and do not show a stable ratio to employment changes during the 2008-9 recession.  Initial claims are reported a week ahead of continued claims.[3]

[1] The average continued claims was 1.7 million in both January and February, which is the baseline from which I calculate the “excess.”
[2] Hours worked are also of interest because many people were under employed in April (Bick and Blandin 2020).
[3] In March and April 2020, continued claims may include an abnormal share of ineligible claims due to abnormal delays in state processing, although this effect should disappear over a horizon long enough for states to process the claims.  On the other hand, the CARES Act passed March 27 will begin distorting the relationship between employment and continued claims because the Act included a large UI bonus that will encourage an abnormally large fraction of the eligible unemployed to apply.

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