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Monday, 27 April 2020

CBO Projects 14% Unemployment For Second Quarter, Shrinking Labor Force

The Congressional Budget Office, the nonpartisan federal agency that produces budget information for the legislative branch, has announced in a new preliminary projection that the United States will average about a 14% unemployment rate for the second quarter.
When the figure is combined to include the average unemployment rate for the third quarter, the budget office estimates that the unemployment rate will average at about 15% over the the second and third quarters.
“The unemployment rate is projected to average 15 percent during the second and third quarters of 2020, up from less than 4 percent in the first quarter. The unemployment rate is the number of jobless people who are available for and seeking work, expressed as a percentage of the labor force,” said the CBO on Friday.
The budget office says the projection reflects the net combination of total job loss figures and the number of people who are exiting the workforce and not looking for another job, which does not factor into the unemployment rate.
“The increase in that rate in the second and third quarters reflects the net effect of a projected loss of nearly 27 million in the number of people employed and the exit of roughly 8 million people from the labor force,” said the budget office.
“Reflecting that reduction in the labor force, the labor force participation rate — that is, the percentage of people in the civilian noninstitutionalized population who are at least 16 years old and who are either working or seeking work — is projected to decline from 63.2 percent in the first quarter of this year to 59.8 percent in the third quarter,” said the budget office.
According to The Bureau of Labor Statistics, the unemployment rate has not reached a similar level since 1982, when the unemployment rate exceeded 10% for nine months, but never went above 11%. Data from the department is not available prior to 1948.
The labor force participation rate has been more dynamic over time  exceeding 67% for several years beginning in 1997  but has been on the overall decline since 2000. As of March, the labor force participation rate had dropped to 62.7% after experiencing a slight increase through President Donald Trump’s first term in office.
However, the budget office cautions that the projections are preliminary figures and “subject to enormous uncertainty.”
“These preliminary projections, which are subject to enormous uncertainty, reflect information from a number of sources, including high-frequency indicators, private-sector forecasts, and projections of the extent of social distancing derived from analysis of a range of scenarios for the future course of the pandemic,” said the office.
“Since social distancing began in early March, new information has generally suggested a worsening outlook, and private-sector forecasts have been revised repeatedly in that direction. CBO’s projections fall within the wide range of views in those private forecasts but are closer to those that show greater near-term economic weakness,” said the CBO.

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