The onset of the COVID-19 recession absolutely crushed the economy. In a matter of two months in spring 2020, the unemployment rate shot up from a 50-year low (3.5%) to an 80-year high (14.8%). That quarter, U.S. GDP posted its largest ever contraction.
The recession—while fierce—was also brief. By May 2020, the economy was not only growing again, it was growing fast. The third quarter of 2020 generated the largest GDP uptick in U.S. history. During the Great Recession era, the economy was above a 7% jobless rate for 59 consecutive months. This time, it was above 7% for just six months. As of August, we’re at a 5.2% unemployment rate—pretty darn close to what economists consider the nation’s “full employment” rate. On paper, this rebound is one of the fastest on record.
But this speedy recovery isn’t all that it seems: Joblessness is much higher than economic data would suggest.
The data isn’t cooked or intentionally skewed. Instead, it boils down to the fact that the U.S. Bureau of Labor Statistics’ economic data isn’t well-suited to measure a labor market during a pandemic.
See, the official unemployment rate is calculated by dividing the number of unemployed Americans by the number of workers in the labor force. But if a jobless individual isn’t looking for work, they aren’t included in either grouping. Normally, that exclusion doesn’t have a huge impact on the final figure. But it has in this pandemic, during which millions of workers have dropped out of the labor force.
As of August, the civilian labor force count is still 2.9 million lower than it was in February 2020. Despite not having jobs, none of those 2.9 million Americans are included in the official jobless rate. When including those individuals who’ve dropped out of the labor force, the “real” jobless rate jumps to 6.9%. That’s 1.7 percentage points higher than the official rate. At the height of the crisis in April 2020, that “real” jobless rate was 18.9%—or 4.1 percentage points above the official rate at the time.
As Fortune has previously reported, it’s common for unemployed workers to leave the workforce during deep recessions. Still, nothing on the level we’ve seen this go-around has happened before. During the Great Recession era, the official unemployment rate peaked at 10% in October 2009. If you include jobless workers who had dropped out of the labor force, the real unemployment rate for that rate jumps to 10.6%, according to Fortune’s calculations. But that 0.6% difference pales in comparison to what we’ve seen during this crisis.
Why are so many jobless folks not looking for work during the COVID-19 crisis?
There are a number of reasons. Some are older or at-risk Americans who are waiting for the pandemic to end before restarting their job search. Others are working parents—usually mothers—who’ve either struggled to find day care or needed to stay home while their kids learned remotely.
Between February and April of 2020, the U.S. civilian labor force shrank by nearly 8 million workers. Since then, it’s up by more than 5 million—including another 190,000 uptick in August. If the nation sustains its current pace, it would take until early 2023 just to get back to pre-pandemic levels. Simply put: The labor force situation is improving—but we still have a long road ahead to a full recovery.
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