Possible Reasons for Surge in Asian Unemployment Rate

Asian unemployment rate from the last couple of months caught my attention as it is running about 270 basis points (bps.) higher than the headline unemployment rate. Usually, Asian unemployment rate tends to run below the headline unemployment rate by about 140 bps. Both, Black or African American and White unemployment rates remain within a 100 bps. difference from rates seen during the Great Recession. However, the average of the last three months of the Asian unemployment rate is about 600 bps. higher than that seen during the highs of the Great Recession.

Summary Explanation

The chart above shows monthly U.S. Headline and Asian unemployment rates from January 2003 through June 2020, seasonally adjusted.

· From Jan 2003 through Mar 2020, the Asian unemployment rate averaged 4.6%, about 140 Bps. lower than the headline unemployment rate. Asian unemployment during the Great Recession averaged 7.5%, with a high of about 8.4% during December 2009. The pandemic-driven Asian unemployment from April 2020 to June 2020 averaged 14.4% with a high of 15% in May 2020. As of June 2020, the Asian unemployment is up about 270 Bps. higher than the U.S. headline rate.

· The anomaly on the unemployment data could have varied reasons, but the BLS does not breakdown reasons for an outlier. In lieu of that, we have provided an anecdotal explanation based on the most to least probable reasons:

Ø The main reason for the expectation of lower Asian unemployment come from the fact that the demographic tends to be educated and hold jobs in Professional and Technical Services. During the pandemic (and ongoing), workers in this industry could work remotely with very little impact. Within this industry, there are many independent contractors who previously were unable to file for unemployment benefits, but the new rule change actually allows them to file for unemployment benefits. Thus, historically uncounted workers are now getting counted by the unemployment surveyors. Hopefully, the newly acquired benefits don’t act as a disincentive to work and keep the unemployment rate elevated.

Ø When push comes to shove, many Asian workers in H-1B, L-1, or TN visas get furloughed or laid off in preference for the U.S. citizens. Rules to apply for unemployment benefits vary by states for this cohort of workers, but does add to the unemployment pool. The impact to the unemployment rate from this cohort would be short since they have to secure employment quickly to extend their visas. We don’t believe “virus shaming” have caused voluntary unemployment in large numbers and no evidence of large scale Asian discrimination exist at the workplace.

Ø Recent Asian immigrants without college degree or marketable skills tend to own a business and/or work mostly in the Leisure and Hospitality industries, the industry hardest hit by the pandemic. The unemployed Asians in this field may be pushing the rate higher.

Ø Could there be data measurement issues? We know that BLS unemployment number usually underestimates those unemployed, so historical numbers may not have included all unemployed workers. This argument has less validity as there has not been a large shift on data collection methodology.

Ø The typical path for most Asian immigrants to the U.S. has been through the colleges and universities. After a college degree, the U.S. government provide a work permit, which later leads to temporary and then to permanent residence. However, over the last fifteen years, the education and skill level of Asians migrating to the U.S. have changed. The pool of migrants with lesser education and skill have increased. This may be another plausible reason for the higher unemployment rate, as the unemployment rate for those without college degrees tend to be higher.

Conclusion: Each of the factors mentioned above seems to be contributing to a current higher Asian unemployment rate. Or could it be simple reasons as: 1. Expanded coverage of unemployment benefits to those previously not covered; 2. Asians getting more aware of benefits available to them now than fifteen years ago.