A previously unimaginable number of workers have applied for state unemployment insurance (UI) benefits as a result of the coronavirus shock. In the last seven weeks alone, more than 30 million workers have applied for unemployment compensation. That is nearly one in five workers. And it is nearly five times the worst seven-week stretch of the Great Recession.
These figures do not include people who applied for Pandemic Unemployment Assistance (PUA), the new federal program that extends unemployment compensation coverage to many workers who are not eligible for regular UI but are nevertheless out of work as a result of the virus—people like independent contractors, gig workers, and people who had to leave their job to take care of a child whose school closed. It took a while for the PUA programs to get set up, but they are now operational in many states. With today’s data release, the Department of Labor (DOL) began providing PUA claims numbers, reporting that nearly a million people had had PUA claims processed by April 18, and at least another 1.4 million had filed PUA claims since that time.
It is worth noting that the DOL reports that 33.5 million workers applied for regular state unemployment compensation during the last seven weeks on a “seasonally adjusted” basis, compared with 30.7 million on an unadjusted basis. Seasonal adjustments are usually helpful—they are used to even out seasonal changes in claims that have nothing to do with the underlying strength or weakness of the labor market, typically providing a clearer picture of underlying trends. However, the way DOL does seasonal adjustments is distortionary at a time like this, so I focus on unadjusted numbers here.
Tomorrow, the April jobs numbers from the Bureau of Labor Statistics will be released. Will those numbers show 30.7 million jobs lost? It’s difficult to say. For one, the surveys the jobs numbers are based on reflect the week that includes the 12th of the month, not the whole month. At that point, “only” 24.4 million people had applied for regular state unemployment insurance, plus a million more who had had PUA claims processed. But it’s also worth thinking about what goes into an overall employment change, because it’s not just layoffs where people applied for UI. The change in employment in any period is equal to the number of hires over the period minus the number of job “separations” over the period. Layoffs where people applied for UI are job separations, but so are job losses where people didn’t file for UI (or were frozen out of the system), and voluntary quits, and worker deaths. All of those components are moving right now.
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Hires have surely dropped dramatically, as have voluntary quits. The UI data show that layoffs where people applied for UI have skyrocketed, but job losses where people didn’t apply for UI have also likely risen dramatically (just looking at people frozen out of the UI system, it is likely that millions more workers lost jobs—an EPI survey finds that for every 100 workers who were able to file for UI, 37 additional workers tried to apply but could not get through the system to make a claim). In other words, there are important elements aside from what shows up in the UI data that go into determining the overall change in employment. As a result, it remains to be seen whether the overall employment decline related to the coronavirus will be greater or less than the increase in coronavirus-related jobless claims. Tomorrow’s data will tell.
What about the unemployment rate? All else equal, layoffs of the magnitude reflected in the initial state UI claims of the last seven weeks would translate into an unemployment rate of 22.2%, and layoffs of the magnitude reflected in the state UI claims only through the week that includes April 12 would translate into an unemployment rate of 18.3%. However, as described above, not all else will be equal. Further, the official unemployment rate will likely not reflect the full coronavirus-related employment decline. Whether or not a worker receives UI has no bearing on whether or not they are counted as unemployed. People are counted as unemployed if they are jobless, available to work, and actively seeking work (the only exception to the “actively seeking work” condition is if a worker is only temporarily unemployed and expects to be called back to their job). This means many workers who lose their job as a result of the virus will be counted as dropping out of the labor force instead of as unemployed because they are unable to search for work due to the lockdown, or because they are not available to work because they are, for example, caring for children whose school has closed. Tomorrow’s data will reveal the magnitude of the unemployment rate’s failure to reflect coronavirus-related employment declines.
As in all recessions, job loss in this recession is not being meted out equally. Many of the jobs in particularly at-risk sectors in this recession are low-wage jobs, like those in restaurants and bars, hotels, personal services, and brick-and-mortar retail. That means low-wage workers are seeing disproportionate job loss. And because women and black and Hispanic workers are more concentrated in these jobs, they are likely experiencing greater job loss. We will also get good information on all these dynamics tomorrow. And of course, workers aren’t just losing their jobs. Our health care system ties health insurance to work, so millions of workers have likely already lost their employer-provided health insurance.
Short-Time Compensation (STC)—also known as work-sharing—is an alternative to layoffs for employers who see a drop in demand for their goods or services. STC allows employers to reduce hours of work for their workers rather than laying some workers off. Under STC, workers who have their hours reduced get partial UI. Unfortunately, the STC infrastructure is not well developed, and many states do not even have an STC program. STC would ideally be being used extensively right now to save jobs, but—while it is ramping up—the levels remain very low. On April 18, 88,447 workers were receiving STC, a tiny fraction of the 17.8 million receiving regular state benefits at that time. Additional aid to states should be provided to implement, improve, and promote STC programs.
The Congressional Budget Office projects that without additional relief, the unemployment rate will average 16% in the third quarter of this year and 10.1% for the entire calendar year of 2021. The relief and recovery packages passed so far have not been big enough to deal with the scale of this crisis, and more aid is critical. The next federal relief and recovery package should make substantial additional investments in unemployment compensation, including providing additional funding to states to hire the staff they need to speed up processing and to make improvements to websites and other administrative infrastructure, and extending the across-the-board $600 increase in weekly benefits well past its expiration at the end of July—at least until unemployment is falling rapidly and is at a manageable level. The next package should also include substantial aid to state and local governments, worker protections, paycheck protections, investments in our democracy, relief for the postal service, and significant investments in testing and contact tracing so that, in the absence of a vaccine or effective treatment, we have a chance of being able to reopen the economy successfully.