Measuring Unemployment in Crisis: Effects of COVID-19 on Potential Biases in the CPS

Abstract

From February to April 2020, as COVID-19 hit the U.S. economy, the official unemployment rate (UR) climbed from 3.5 percent—the lowest in more than 50 years—to 14.7—the highest since measurement began in January 1948. This unprecedented, speedy quadrupling of UR coincided with major disruptions in survey-data-collection procedures and a dramatic, differential drop in response rates.To what extent did measurement issues contribute to this quadrupling? We revisit two recently studied potential biases in the Current Population Survey: rotation group bias (Krueger, Mas and Niu, 2017) and difficulty-of-reaching bias (Heffetz and Reeves, 2019). We extend the original analyses to the years prior to the crisis and focus on the six months of peak UR, from April to September 2020. Our ballpark estimates suggest that the peak official UR figure could be biased by up to ∼1.5 percentage points in either direction.