Thursday, October 1, 2020

Unemployment claims stay high, and more people are staying out of work

With it being a Thursday, that meant another week of unemployment claims to digest. And it was largely the same story as we've seen, where claims are generally fading downward, but are still at levels that this country had never seen prior to 2020.
Initial jobless claims filed through state programs dropped to 837,000 in the week ended Sept. 26 from a revised 873,000 in the prior week, the Labor Department said Thursday. Economists polled by MarketWatch had forecast new claims to fall to 840,000.

An estimated 650,120 people also filed new claims under the Pandemic Unemployment Assistance Act, the federal law that temporarily made self-employed workers eligible for benefits for the first time ever. That put the number of actual or unadjusted new claims at 1.44 million — basically unchanged from the prior week.
Continuing claims actually went up, once you include the PUA program for gig workers, and count jobless people that have "graduated" from the regular unemployment, and are now in the extended benefits program.
But notice that bump in the claims that happened in late August? That actually might not have happened, as California had sketchy numbers in the PUA program that it is now looking into.
Investigations indicated that there was a growing problem with fraud and the PUA program was the target of scammers who, among other activities, stole people's identities to apply for benefits they weren’t entitled to.

The state of California has seen the largest surge of these questionable requests for PUA. “We do suspect that a big part of the unusual recent rise in PUA claims is linked to fraud,” said Loree Levy, a spokesperson for the California Employment Development Department (EDD). She said the state was investigating “unscrupulous attacks” exploiting identity theft and vulnerabilities in the system.

In just one example, the New York Times cites that “21 inmates in the San Mateo County, Calif. jail filed for pandemic unemployment assistance, resulting in payments of at least $250,000, according to the district attorney.”

.... In response to this situation, after already paying billions in claims, California will not accept new unemployment claims for the next two weeks. The state announced on Saturday that it will use this time to work on procedures and systems in place to prevent fraud, calling it a “reset period that will help expedite new claimant payments, reduce fraud and tackle backlog issues moving forward.”
As a result, California did not process any new unemployment claims for the week reported, so the weekly numbers are assuming the prior week's totals to keep from a misleading "decline" from happening. This means that both the current and prior weeks may be off from what reality is, although the numbers would be high regardless.

Those potentially inflated/fraudulent PUA claims in California likely drove PUA claims higher for September, and explain the declines we've seen in the total PUA claims in the last two weeks. If you take out California, you'll see continuing PUA claims have been between 7.7 million and 8.3 million since the start of August, with increases in each of the last 3 weeks.
More concerning is that more Americans continue to stay on the unemployment rolls. This is shown in the mostly steady rise in the number of people receiving extended benefits, which kick in after you've gotten unemployment for 26 weeks. That number went over 2 milion for the first time in this most recent report.
Economist Danielle Marceau noted in CBS Marketwatch this week that a lot of people who thought they were only going to be out of work for a short time are finding out that they're not getting their jobs back, even as our economy is allegedly "recovering".
According to the Q2 2020 Yelp Economic Average report, in April 2020, 79% of closed businesses said they were closing temporarily, while 21% announced permanent closings. Over the months that followed, the number of permanently closed businesses have steadily grown, while the inverse has been happening for temporary closings. By July, we saw the number of permanently closed businesses rise to more than 50% of the total number announced closings.

Large corporations — including Ford, MGM Resorts, Coca-Cola, Salesforce, and Boeing — are announcing that furloughs are now becoming layoffs as the economic recession persists. This is a structural shift in the way we classify unemployment, which is on the rise, despite the fact that August unemployment numbers exceeded expectations.
With that in mind, tomorrow will give us the September jobs report - the final report before November's election. And we'll see if we continue to see increases in long-term unemployed, and whether these large numbers of layoffs will be offset by the number of people being brought back to work.

But there's clearly a long way to go before we get back to a stable jobs situation for millions of Americans, and with expanded payments ending with the prospect of further stimulus being questiobablee at best, it doesn't seem like there's much to stop the massive number of layoffs that continue nearly 7 months after COVID 19 broke out.

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