Unemployment rate keeps falling faster than projected

According to today’s jobs report from the US Department of Labor, the US unemployment rate in October fell to 6.9 percent, down from 7.9 percent in September. As the chart below shows, that progress continues to be significantly better than projections issued by the nonpartisan Congressional Budget Office (CBO) in May. Back then, CBO expected the unemployment rate in the fourth quarter of 2020 (that is, for the months of October, November, and December) to average 11.5 percent. Not only is the October 2020 unemployment rate already well below that level, but it is also significantly below the 8.6 percent average CBO projected for the fourth quarter of 2021.

CBO Projection vs. Actual Unemployment
Rate, CYs 2020-21

Sources: Congressional Budget Office and Department of Labor. The “CBO projection” line is the author’s depiction based on monthly, quarterly, and annual unemployment rate projections included in Table 1 of the May 2020 CBO report.

The coronavirus crisis and resulting recession have been unprecedented in many ways. Unemployment spiked in April to 14.7 percent, the highest level since official records started being kept in 1948. But progress in reducing unemployment since then has been equally historic, now cutting the unemployment rate to less than half its peak in the past six months. Only once before this year has the US unemployment rate fallen by over 1.0 percentage point in a single month (in November 1949 when large coal and steel strikes ended). Meanwhile, the unemployment rate has now dropped by more than 1.0 percentage point in four of the past six months (and the other two months featured historically large declines of 0.9 and 0.5 percentage points).  

It’s also worth recalling that today’s faster-than-expected improvement in unemployment is the opposite of the nation’s experience following the Great Recession. Back then, actual unemployment consistently exceeded the rosier projections of those supporting the Obama administration’s then-record 2009 stimulus plan, known as the “Recovery Act.” As NPR described this spring, “The 2009 Recovery Act cost around $800 billion, and the person put in charge of overseeing how a lot of that money was spent was the country’s new vice president, Joe Biden.”

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