Another 1.3 million people applied for unemployment insurance (UI) benefits last week. That includes 840,000 people who applied for regular state UI and 464,000 who applied for Pandemic Unemployment Assistance (PUA). PUA is the federal program for workers who are not eligible for regular unemployment insurance, like gig workers. It provides up to 39 weeks of benefits, but it is set to expire at the end of this year. The 1.3 million who applied for UI last week was a decline from 53,000 from the prior week’s revised figures, though trends over time should be interpreted with caution right now because California data are being imputed because they have temporarily paused its processing of initial claims. It is worth noting that today’s data on initial claims do not include any workers who may have been laid off or furloughed in the wake of President Trump tweeting earlier this week that he was halting stimulus talks (more on that below).
Republicans in the Senate allowed the across-the-board $600 increase in weekly UI benefits to expire at the end of July, so last week was the tenth week of unemployment in this pandemic for which recipients did not get the extra $600. On Tuesday, President Trump announced he had ordered his negotiators to stop top talks with Democratic leaders on another stimulus package. If that abrupt move holds, it means the extra $600 is not coming back anytime soon, and the economy will also not be getting other crucial stimulus measures it needs, including aid to state and local governments.
This is terrible economics. For example, the extra $600 in weekly UI benefits was supporting a huge amount of spending by people who, without it, have to make drastic cuts. The spending made possible by the $600 was supporting millions of jobs. Cutting that $600 means cutting those jobs—it means the workers who were providing the goods and services that UI recipients were spending that $600 on lose their jobs. The map in Figure B of this blog post shows many jobs will be lost by state because of the expiration of the $600.
Not providing aid to state and local governments will also cost millions of jobs. The labor market is still more than 12 million jobs below where we would be if the recession hadn’t happened, and job growth is slowing. Now is not the time to cut off stimulus talks. Cutting off talks also means no additional housing and nutrition assistance, no COVID-related health and safety measures for workers, no aid to the Postal Service during this critical time, and no additional support for virus testing, tracing, and isolation measures, or virus treatment and support for hospitals and other health providers. All of these things would have helped our economy and the people in it recover from the COVID crisis. Cutting it off is unthinkable at a time like this, yet that is what the president seems to have done.
Cutting off stimulus is also exacerbating racial inequality. Due to the impact of historic and current systemic racism, Black and Latinx communities have seen more job loss in this recession, and have less wealth to fall back on. The lack of stimulus hits these workers the hardest. Further, workers in this pandemic aren’t just losing their jobs—an estimated 12 million workers and their family members have lost employer-provided health insurance due to COVID-19. Now is when Congress should act to boost the economy to bring back jobs; the president ordering talks to stop is a deeply irresponsible move.
But what about, for example, the supposed work disincentive effect of the extra $600? Rigorous empirical studies show that any theoretical work disincentive effect of the $600 was so minor that it cannot even be detected. Further, there are 6.6 million more unemployed workers than job openings, meaning millions will remain jobless no matter what they do. Dropping the $600 cannot incentivize people to get jobs that are not there.
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Most states provide 26 weeks (6 months) of regular benefits, and October is the 8th month of this crisis. That means many workers are exhausting their regular state UI benefits. In the most recent data, continuing claims for regular state UI dropped by a million, from 12.0 million to 11.0 million.
The good news is that after an individual exhausts regular state benefits, they can move onto Pandemic Emergency Unemployment Compensation (PEUC), which is an additional 13 weeks of regular state UI (and is only available to people who exhausted regular state UI). However, in the latest data available for PEUC (the week ending September 19th), PEUC claims rose by 154,000, offsetting less than 20% of the 802,000 decline in continuing claims for regular state benefits for the same week. The relatively small increase in PEUC relative to the decline in continuing claims for regular state benefits suggest that workers may be experiencing delays getting on to PEUC.
DOL data suggest that right now, 26.7 million workers are either on unemployment benefits or have applied recently and are waiting to get approved (see Figure A). But importantly, that number is a substantial overestimate. For one thing, initial claims for regular state UI and PUA should be non-overlapping—that is how DOL has directed state agencies to report them—but some individuals are erroneously being counted as being in both programs. An even bigger issue is that states are including retroactive payments in their continuing PUA claims, which would also lead to double counting. All this means nobody knows exactly how many people are receiving unemployment insurance benefits right now, which is another reminder that we need to invest heavily in our data infrastructure and technology.