Speed Reads

the coronavirus crisis

Fed Chair Powell says lower unemployment rate hides true 'deterioration' of labor market

America's unemployment rate during the coronavirus pandemic peaked at 14.8 percent in April. Since then, it has fallen, reaching 6.3 percent in January. That's good news on the surface, but in a speech Wednesday, Federal Reserve Chair Jerome Powell warned the published unemployment figures "have dramatically understated the deterioration in the labor market."

In reality, he said, "the pandemic has led to the largest 12-month decline in labor force participation since at least 1948." Powell explained that fear of the virus itself, the disappearance of opportunities in heavily-affected industries, and virtual learning (which has forced parents to leave their jobs to provide all-day care for their children) have all prevented millions of people from looking for work. "Correcting this misclassification and counting those who have left the labor force since last February as unemployed would boost the unemployment rate to close to 10 percent in January," Powell said.

Powell added that "even those grim statistics" don't show the full picture, which includes the fact that low-wage workers have experienced a 17 percent decline in employment since last February — compared to just 4 percent of those in the top quarter of wage-earners — and the numbers have "changed very little in recent months." Read Powell's full address here.