Economic Impact: Unemployment During the Pandemic

It goes without saying that one of the major concerns surrounding COVID-19 in the Detroit area is the impact that the pandemic has had on employment. After years of employment growth, many states are facing a period of economic uncertainty, and our area is no exception. 

We’re here to take a look at some of the numbers surrounding jobs in Michigan during these challenging times, and also provide some insight into what these numbers mean.

Defining Unemployment 

Every good data-driven discussion begins with defining the data in question. In this case, we’re defining how unemployment numbers work and what they look like during normal times in order to show the significance of the impact during this pandemic. It’s important to understand what the United States unemployment rate per the Bureau of Labor Statistics (BLS) includes and does not include. 

The most commonly seen unemployment indicator is the U3 unemployment rate, and is widely considered to be the official unemployment rate. While this number is a handy indicator for economists, it doesn’t necessarily paint the entire picture of employment, as the U3 unemployment rate excludes people who are not in the workforceor people of working age who are not working or actively looking for work.

This number can be problematic, as people who have been seeking work for a long time, but haven’t actively looked for a job in the past four weeks are excluded from the U3 unemployment number, making the percentage of unemployment look much lower than it actually is. 

The BLS has more inclusive unemployment numbers as well, the most accurate of which is the U6 unemployment rate. This number includes all unemployed people who are marginally attached to the labor force, as well as those who are employed only part time fore economic reasons. The U6 number tends to be significantly larger than the U3 number. 

Additionally, the number of jobs available and the number of jobs filled are data that change seasonally. Because of this, all unemployment percentages are calculated with and without seasonal adjustment in order to give experts a better idea of the true numbers, including changes over time. 

The key takeaway from this comparison of the official U3 number and the more true-to-life U6 number, is that at any given time under normal circumstances, the number of people who are actually unemployed or underemployed is higher than what is presented in the news. 

So, it may not be surprising that pandemic-related job losses are unlikely to count towards the official unemployment count, when even during normal times, those who are not actively searching for a job are not counted in the U3 unemployment rate. 

However, there has still been a significant impact on this number, in the form of an increase from 3.5% in February to 4.4% in March. This amounts to 7.1 million people across the nation. 

Now, we’ll talk about the numbers that may be missed by the BLS unemployment rate, such as those who have been temporarily laid off, and how heavily Michigan has been impacted.

Statewide Unemployment Numbers

Even as early as March, there were reports of heavy job losses in Michigan, with over 80,000 people filing for unemployment in the days leading up to the Stay at Home order. In spite of mitigating efforts, these numbers have continued to climb. 

We live in one of the most heavily impacted states in terms of employment. According to NBC News, as many as 1 in 6 people in Michigan have lost their jobs completely. Over 1,317,000 unemployment claims have been filed between March 14 and May 14, amounting to nearly 28% of the state labor force. 

Additionally, many people have been impacted by reduced hours or wages, and as a result are facing underemployment. The Big Three auto companies reduced operations across the country for much of March and April, and made plans to reduce or defer executive salaries to compensate for production losses.

Who’s Been Hit the Hardest?

Like the Big Three, many production companies closed or reduced non-essential operations throughout the nation. This created economic uncertainty with wage reductions or job losses for many. However, other industries were potentially hit even harder. 

According to the Urban Institute, Accomodation and Food Services is the industry that’s been hit the hardest across the nation, which is not surprising amid the calls for social distancing measures. Many restaurant establishments have shifted to take out orders only and still others closing operations completely. This has posed a danger to the roughly 447,000 food service jobs in the state of Michigan alone (roughly 9% of Michigan’s total workforce as of March 2020), as these employees are faced with reduced hours or layoffs. 

Additionally, most major grocery stores, retail stores, and banks have reduced hours or closed. Some grocery stores and essential retail stores are also closing to the public early to allow employees to stock and sanitize the stores. Grocery store employees are classified as essential workers, and their employment has been unaffected other than potential change in shifts. Many retail employees are facing reduced hours or layoffs as a result of store closings. 

Other traditionally low-wage business sectors that have been heavily impacted by the pandemic include (non-emergency) Health Care and Social Assistance; Administrative and Support and Waste Management and Remediation Services; Arts, Entertainment and Recreation; Educational Services; and Construction. 

Employment and Detroit 

So what does all of this mean to the Detroit area? Let’s start by taking a look at how many Detroit-area workers are employed by the hardest-hit industries. 

According to the 2018 American Community Survey, there are over 170,000 workers in production occupations alone, plus an additional 117,000 workers in food service, in the Detroit metropolitan area alone. These are two of the hardest-hit industries in the face of the pandemic, impacting a combined 14% of the Detroit workforce.

Employees of the City of Detroit are also facing reduced wages and layoffs to compensate for the interruption of city revenue due to the Stay at Home order. The city has an emergency fund and some budget surpluses to offset some of the revenue loss. However, many city employees have been placed on total furlough, and many others have seen cuts to their working hours.

What’s Next? 

What’s being done for all of those who have seen an impact on their employment because of the pandemic? In spite of the overwhelming workload, Michigan’s Unemployment Office is working diligently to process all claims, and encourages all those impacted to continue submitting their claims and reaching out. 

Data is constantly updating, particularly in times of crisis. As we continue to explore that data surrounding employment and the impact of the pandemic on our community, and answer all of your data-driven questions, we believe that we will see signs of recovery over time. 

The data analysis for this blog was done in response to an AskD3 request. We would like to encourage all members of our community to continue reaching out to AskD3 with all of your questions about Detroit data and the impact of COVID-19 in our city so that we can understand what information will be most helpful to the community.