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Anticipating the Impact of the Coronavirus on U.S. Unemployment Rates and EB-5 TEA Determination
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Learn how the coronavirus, or COVID-19, may affect EB-5 targeted employment
area (TEA) designation due to changes in the U.S. national unemployment
Anticipating the Impact of the Coronavirus on U.S. Unemployment Rates
and EB-5 TEA Determination
The closing of businesses due to the pandemic caused by the rapid spread of
2019 novel coronavirus
, which causes COVID-19, has had a significant effect on employment levels
in the United States. At this stage, it is impossible to know exactly what
the long-term outcomes for employment will be, but it is reasonable to
expect an increase in the national unemployment rate and fluctuations in
regional unemployment rates. This, in turn, will affect
targeted employment area (TEA) designation
based on a high unemployment rate, but not rural TEA designation.
Additionally, the effects will be delayed due to data lag, with the data
for the current calendar year becoming relevant only in April 2021.
<strong>COVID-19 and EB-5 TEA Designation: The Basic Assumptions</strong>
Although numerous factors will influence the outcomes of the coronavirus
pandemic for EB-5 investors, we can make several key assumptions. Infection
rates and the effectiveness of response strategies will fluctuate across
regions. Severely affected regions may experience unemployment rates that
are on par with or higher than the national unemployment rate. Likewise, in
less affected areas, the unemployment rate may be significantly lower than
the national unemployment rate. The implications of this is that new
regions may qualify as TEAs, and regions that currently qualify as TEAs may
no longer qualify.
Moreover, the changes to unemployment rates and their implications for
will not become clear immediately. The two main types of data used to
determine whether a project location qualifies as a TEA are American
Community Survey (ACS) data and the data published under the Bureau of
Labor Statistics (BLS) Local Area Unemployment Statistics (LAUS) program.
The earliest update to a relevant data set relating to the current calendar
year is expected in April 2021.
Understanding Unemployment Data for TEA Designation: ACS vs. BLS Data
calculating unemployment rates for TEA designation
, we use either ACS five-year data only or the census-share method, which
relies on a combination of ACS and BLS data. Data about 2020 unemployment
statistics will not become available until April or December 2021,
depending on the data set.
<a href=”https://www.census.gov/programs-surveys/acs”>ACS data</a>
is based on a five-year period and updated each December, with the data set
published in 2019 covering the 2014 to 2018 five-year period. The next set
of five-year data, expected in December 2020, will cover 2015 to 2019.
Thus, data related to current employment conditions will not appear until
December 2021, when the 2016 to 2020 data will be published.
<a href=”https://www.bls.gov/lau/”>BLS data</a>
is published monthly, but using monthly data for TEA calculations would not
make sense, as the designation would need to be updated each month when the
data becomes outdated. Consequently, census-share calculations typically
rely on annual BLS data, which is published in mid-April each year.
Therefore, the 2020 data will be published in April 2021.
Because the ACS five-year calculation method relies on data covering a span
of five years, it tends to be the more stable method, and the effects of
the COVID-19 crisis may not be as pronounced. Additionally, the updated
information will not be available until December 2021, so it will take
longer for the current employment rate changes to affect the data.
In contrast, the census-share method relies on annual BLS data in addition
to ACS data, and the relevant data will be released in April 2021. This
means calculations based on BLS data will show the effects of the COVID-19
pandemic faster than ACS five-year calculations, and we will probably
observe more significant fluctuations over time.
United States Citizenship and Immigration Services (USCIS) accepts either
the ACS five-year method or the census-share method. That means a project
area must qualify as a TEA based on <em>either</em> calculation method—the
project area does not have to qualify under both. In other words, even if a
project area does not qualify as a TEA when we use the ACS five-year method
to calculate unemployment rates, it could qualify as a TEA when we use the
<strong>Future TEA Status in the Face of Uncertainty</strong>
While it is difficult to predict future TEA status at the best of times,
the current uncertainty complicates forecasts even further. Current TEAs
with unemployment levels far above the threshold might continue to qualify
for designation. Similarly, we can base assumptions on the effects of the
COVID-19 outbreak as they become clear. For example, considering the extent
the outbreak in New York
, it should be safe to assume current TEAs in New York will still qualify
as such when the data for 2020 is released in 2021.
Calculations are usually made at the census-tract level for a small labor
force. This makes it extremely difficult to predict how COVID-19 will
affect specific TEAs, as it is impossible to know at this stage whether or
not major changes will occur. Moreover, if unemployment rates rise steeply
due to COVID-19, entire counties may qualify as TEAs, eliminating the need
for census aggregation. Finally, the most significant impacts of the
pandemic should be temporary, so unemployment rates that increase in the
wake of COVID-19 might fall back below the threshold once the local economy
recovers. Whatever happens, it is safe to assume that unemployment rates
While no one can predict the future, we can look at <a href=”https://www.bls.gov/lau/#data”>monthly county-level BLS data</a>
to develop an idea of a project site’s continued TEA status. Although using
BLS data will be more accurate for the census-share method, it is useful
for the ACS five-year data method. ACS data will not be available until
December 2021, but analyzing the BLS data can show how conditions in the
project area are changing over time. This could provide valuable clues
about what we can expect from the updated ACS data.
<p>Reprinted with permission.</p>
About The Author<br/>
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<b>Sam Silverman</b> <p> is a managing partner of EB5 Affiliate Network.
If you would like us to monitor a specific project location for you, please
e-mail the EB5AN team at <a href=”mailto:firstname.lastname@example.org”>email@example.com</a>
or <a href=”https://go.oncehub.com/JeremyShackle3″>schedule a call</a>. We
have developed an excellent understanding of the factors affecting TEA
determination through the development of our
free national EB-5 TEA map
EB-5 TEA qualification report
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