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Unemployment rate: What does it measure and what is it now? Plus billions paid to fraudulent claims

  • / Updated:
  • Abbi Aruck 

Unemployment claims skyrocketed during the pandemic, now, the US has a strong labor market.

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However, $45.6 billion was paid out to fraudulent claims during the pandemic.

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What does the unemployment rate really measure?

The unemployment rate is the percentage of the labor force without a job. Generally, the unemployment rate will rise of fall as the economy changes. When the economy is not in great shape and jobs are hard to come by– the unemployment rate is expected to rise. When the economy is healthy and growing and there are plenty of jobs available, the rate is expected to fall.

The Bureau of Labor Statistics (BLS) considers those with temporary, part-time, or full-time jobs as employed. People who work for at least 15 hours, unpaid work for a family business or farm are also considered employed.

The unemployment rate is adjusted seasonally. This is done to account for predicable variations– like hiring more employees for the holidays. The BLS also provides an unadjusted rate.

There are six different ways the unemployment rate is calculated. Each way is calculated with different criteria. The most widely used and cited is the U-3 rate, but the U-6 rate is the most comprehensive and is often called the real unemployment rate.

A strong labor market in the US

A report by the BLS found that in August, 315,000 new jobs were added to the market. In July the unemployment rate was 3.5% and rose to 3.7% in August. This is only because of the 80,000 new employees to enter the workforce. Employment gains in June and July were down by 107,000 jobs. Last month, retailers, factories and health care all added jobs.

The labor market remains strong, despite slowing economic growth and rising fears of recession. However, a strong labor market can fuel inflation. This is especially a concern right now as many businesses are already struggling to keep up with rising demand for goods and services. The labor market is strong, but there is a mismatch– the demand for workers substantially exceeding the supply of available workers. The number of people working or looking for work rose by 786,000 in August, after two months of decline.

Unemployment figures from the BLS

In August, unemployment rates were higher in 16 states and stable in 34 states and the District of Columbia. All 50 states and the District had the rate of unemployment decreases from a year earlier. The national unemployment rate rose to 3.7% over the month but was 1.5% lower than in
August 2021. Click here to read the entire report from the BLS.

Pandemic unemployment fraud worth over $45 billion

$45.6 billion in pandemic unemployment benefits may have been paid to criminals between March 2020 and April 2022. This figure is much larger than the $16 billion potentially paid to fraudulent unemployment claims that the office cited in a June 2021. Since then, there have been increased payments tied to Social Security numbers of people who filed in multiple states, who were deceased and who used suspicious email accounts in their claims. The 2021 alert also found payments tied to Social Security numbers of federal prisoners to be a high-risk area.

Unemployment fraud increased dramatically after Congress expanded the program to help Americans cope during the pandemic. State unemployment agencies were overwhelmed with record numbers of claims. This led to relaxing some requirements in an effort to get the money out the door quickly to those who really needed it. Within five months, more than 57 million people filed claims for unemployment benefits. States and Congress then improved their verification requirements in an attempt to stop the fraud. An example of this is, a new temporary program, that allowed freelancers, gig workers and others to collect benefits for the first time.

Since March 2020, it is estimated that a total $872.5 billion has been paid out in pandemic-related unemployment benefits.

Nearly a million Social Security numbers were used by people who filed for benefits in two or more states. Roughly 206,000 Social Security numbers of deceased people were used to receive more than $139 million in potentially fraudulent benefits. Plus, another 1.7 million Social Security numbers associated with suspicious email addresses. It was also found that Social Security numbers of potentially ineligible federal prisoners were used to file for more than $267 million in benefits.

More than 1,000 people have been charged with crimes involving unemployment benefits fraud since March 2020. Now, there have been more than 400 convictions. More than 190,000 investigations have been made into unemployment benefits fraud.

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