ISU research develops model to show economic impact of coronavirus

As economists look to measure the economic impact of coronavirus, an Iowa State University professor and graduate student developed an alternative metric in a recent study.

The report looks at employment data from the U.S. Current Population Survey between January and April to establish an employment-at-work rate.

John Winters, ISU associate professor of economics and co-author of the study with student Seung Jin Cho, said the unemployment rate can still be “useful.”

However, simply looking at the rate, Winters said, excludes people who either left the workforce or had a job but couldn’t work because of coronavirus.

“What happens sometimes is people stop looking for work because they don’t think there are going to be jobs available,” Winters said. “That’s usually amplified during recessions.”

This isn’t a new criticism of using unemployment rates to track the health of the job market, but coronavirus adds a new wrinkle.

“They might also stop looking for work and working because they don’t want to get sick or get their families sick,” Winters said. “The virus is putting a virtual barrier between people and jobs that wouldn’t exist in normal times.”

Instead, Winters’ employment-at-work rate factors in people not staying in the workforce or people with jobs who aren’t working during the pandemic.

The rate highlights gaps in job losses between ages, races and household incomes.

While every household income level experienced drops in the employment-at-work rate, households under $75,000 saw particularly noticeable drops.

Those with at least a bachelor’s degree saw a 7 percent drop in employment-at-work. Those with only a high school diploma saw their numbers take a 12 percent dip.

Racially, Hispanic, Black and Asian workers saw more significant declines than their White counterparts.

“The more historically disadvantaged groups — the lower income, the lower education, the young, the racial minorities — they tend to suffer the most,” Winters said.

Unemployment rates also support those trends. Unemployment among Blacks jumped nationally from 6.7 percent to 16.7 percent.

A direct comparison of the two rates — employment-at-rate and unemployment — often yield similar numbers. Hispanic unemployment went from 6 percent to 18.9 percent.

When the federal unemployment rate increased by 10.3 percent from March to April — from 4.4 percent to 14.7 percent — the employment-at-work rate saw a 10.35 percent drop.

Winters said looking at those two numbers is “comparing apples to oranges,” though.

“You can’t just look at the numbers and compare one to another,” Winters said. “The denominators are different. The denominator for the unemployment rate is more narrow.”

Comments: (319) 398-8394; john.steppe@thegazette.com