California's reported unemployment rate (seasonally adjusted) in May notched down 0.1 point to 16.3%. Continuing COVID-related issues with the core surveys used to estimate the labor force and jobs numbers, however, indicate the actual rate was higher.

Total reported employment dropped 60,700 from the revised April numbers, while total unemployment eased by 25,100.

The actual level of unemployment, however, was likely higher than the reported numbers. The labor force and jobs numbers are based on surveys done the week of May 12. The UI initial claims data shows substantial continuing increases in unemployment after that date, although now leveling into a range about 8 times above the 2019 averages. More importantly, BLS again indicated there were significant COVID-related issues in conducting the surveys for both the labor force and jobs numbers. While these issues have affected the numbers since March, the effect was somewhat lower but still substantial for the May numbers.

The more significant issue continues to be an elevated number of workers indicating they were “employed, but not at work.” BLS analysis indicates most of these responses should instead have been classified as “unemployed on temporary layoff.” BLS indicates that correcting for this factor would have raised the national unemployment rate by 3 percentage points, down from a 4.8 point effect in April. Similar factors affect the California reported data but, based on analysis of the Current Population Survey data, at a somewhat higher level.

The weekly Unemployment Insurance and Pandemic Unemployment Assistance (PUA—for self employed) initial claims data is an early and broader indicator of the extent of the economic effects from the emergency measures. Through the week of June 23, California’s initial claims rose a combined 6,237,667 since the measures went into effect. Following the initial upsurge, weekly claims have remained close to their 4-week average of 310,000. While generally leveling off, claims continue at a rate about 8 times above their 2019 average. These numbers do not translate directly into unemployed and include persons submitting more than one application, applications that are subsequently denied, and persons who find a job after applying. The continuing high levels of initial claims, however, indicates continuing economic effects from the current social distancing measures.

This week’s report also indicated a rise in the number of workers who have exhausted their regular benefits and are seeking a 13-week extension under the new Pandemic Emergency Unemployment Compensation (PEUC) program. California initial claims were at 425,056 or 39% of total claims nationally. Long-term unemployment was a significant problem in California as a result of the shallow recovery from the 2008 recession. The PEUC numbers will be an early indicator of this factor in the current recovery, especially important due to its effect of depressing future wage and income prospects for the affected workers.

The California and Federal WARN Acts require certain employers to give a 60-day notice prior to a facility closure or mass layoff. While the Governor has paused the associated penalties for not meeting the requirements, the requirements themselves remain in place. Consequently, many of the recent reports cover layoffs effective in prior months. Filings, however, continue to lag the numbers reported in the UI Initial Claims but give an indication of the geographic distribution of the layoffs.

Total number of layoffs reported for April through June 17 was 651,485. Reports covering permanent layoffs or business closures eased to 10.8%, below the level 2 weeks ago but still above the initial results. The three highest counties--Los Angeles, San Diego, and Orange Counties--accounted for 54% of layoffs in the notices.

The reported national numbers show US unemployment rate (seasonally adjusted) 1.4 points lower to 13.3%, but more likely was about 3 points higher due to the survey factors discussed above for California. Employment rose 3,839,000 and unemployment grew by another 2,093,000.