There's a lot of confusion around about how to interpret unemployment numbers right now. Measures of unemployment combine two unobservable parts: an unavoidable part due to lock-downs and necessary social distancing, and an avoidable part due to knock-on reductions in demand. 1/8

There is some level of "unemployment" we have no choice but to tolerate. For these people, we need to support their income over the coming months and do our best to make sure they have a job to go back to when this is over. This is what expanded UI and wage subsidies are for. 2/8

For each point that wage subsidies reduce "unemployment", we should be very happy. That tells us they are working as they should, keeping workers in a job (even at zero hours) and ready to get back to work when their sector re-opens. We don't need to worry about them for now. 3/8

The rest of measured "unemployment" is due to workers temporarily laid off but on UI and those who have lost their jobs because of a knock-on effect on demand in their sector. We don't need to worry about the first group for now, as with those kept in a job by a wage subsidy. 4/8

All of our worries about the state of the economy right now should be about the number of workers laid off due to the knock-on effects on demand in their sectors. The hope is that the combination of expanded UI, wage subsidies and stimulus checks will offset some of this. 5/8

The only worry about the earlier parts—those marked as employed but paid a wage to be idle and those marked as "unemployed" but furloughed—is forward-looking: how long will the lock-downs last and will there be a permanent shift in demand? Will those jobs exist in 6 months? 6/8

The tricky part right now is that our measurements don't cleanly split these out into separate numbers. UI starts contain furloughed workers who still have a job, laid-off workers who might still be recalled to get the wage subsidy, and then some genuinely unemployed workers. 7/8

We need to try and think of additional information sources that could signal the relative sizes of these components, as well as the medium-term prospects for the jobs we've put on hold. And to try and at least conceptualize and explain this difficulty clearly to the public. 8/8