For the ninth week in a row, millions of Americans filed for initial unemployment benefits. Even as the economy is beginning to reopen in parts of the country, layoffs and furloughs have taken hold of the US labor market.
Another 2.4 million Americans filed for first-time benefits last week, the Department of Labor reported on Thursday. In total, 38.6 million people have filed for initial unemployment aid since mid-March, when lockdowns began in full force across the country.
In a quirk that you don’t see every week, claims for the week ended May 9 were revised down rather sharply — from nearly 3 million to 2.7 million. Although that’s welcome news, it was expected, caused by a reporting mistake from Connecticut’s Labor Department that way overreported the number of claims from the prior week.
Now the (relatively) good news: First-time claims have declined for seven straight weeks. They peaked at 6.9 million in the final week of March.
Economists expect further declines in the next weeks as states begin to reopen their economies. Even so, the weekly claims are still historically high. The four-week average sits just above 3 million claims, while the weekly numbers were around the 200,000 mark in the years before the pandemic.
Pandemic benefits
In addition to regular unemployment insurance, more than 2.2 million people in 35 states filed initial claims for the pandemic unemployment assistance program last week. That’s up from nearly 1.9 million people who filed first-time pandemic claims in the two weeks ending May 9.
Congress created the program to provide benefits to independent contractors, the self employed, gig workers and certain people affected by the coronavirus.
More than 6 million Americans in 27 states were receiving benefits under the pandemic program in the week ending May 2, a spike of more than 2.7 million in seven days.
California had the highest number of residents receiving continuing pandemic unemployment benefits at nearly 1.8 million, followed by Michigan with more than 1.2 million.
The jobs crisis
Joblessness is a crisis in the United States. Wide swaths of the country’s labor market will remain closed as the coronavirus makes returning to work impossible for many Americans. Economists expect many — but not all — jobs will return as the economy reopens. But experts remain concerned that some jobs will be permanently eliminated by this crisis.
Continued jobless claims — which count people filing for unemployment benefits for at least two-weeks in a row — rose to 25.1 million.
Economists are paying more attention to how many people are claiming benefits longer-term to understand how the labor market is recovering as the economy is beginning to reopen.
Last week was also the cut-off week for the survey the Bureau of Labor Statistics monthly jobs report is based on, “giving us a sense of how painful the next jobs report will be,” said Nick Bunker, director of economic research at Indeed Hiring Lab. “Since the April jobs report was measured, 15.8 million claims have been filled.”
But unemployment claims are not equal to lost jobs. The two numbers are based on different surveys.
The BLS’s last jobs report showed some 20 million jobs got wiped out in April, while the unemployment rate jumped to 14.7%, its highest level since the agency began tracking it in 1948.
Special government assistance
In addition to regular unemployment insurance, nearly 842,000 people in 29 states last week filed initial claims for the pandemic unemployment assistance program, which Congress created to provide benefits to independent contractors, the self employed, gig workers and certain people affected by the coronavirus. That’s in addition to the almost 1.8 million Americans who filed first-time pandemic program claims over the two weeks ending May 2. All these applicants are not included in the seasonally adjusted data for the traditional unemployment program.
More than 3.4 million Americans in 23 states were receiving benefits under the PUA program in the week ending April 25, a spike of more than 2.4 million in seven days. Michigan had the highest number of residents filing initial claims and receiving payments under the pandemic program, followed by California.
Government spending soars
Spending on unemployment benefits has skyrocketed to more than $100 billion so far this fiscal year, a huge jump from only a few weeks ago, according to Treasury Department data.
Federal and state outlays totaled just under $102 billion, as of May 12, up from $12.7 billion at the beginning of March.
Nearly $37 billion has already been spent this month alone.
In April, the federal government paid out nearly $27 billion in unemployment benefits as the money from Congress’ historic enhancement to the program started to flow, Treasury Department data shows.
Lawmakers in late March approved a $600 boost to weekly payments for up to four months and added 13 weeks to benefits, both compliments of the federal government. Also, they expanded eligibility to independent contractors, the self-employed, gig workers and certain people affected by coronavirus through the end of the year — also federally funded. The measure was expected to cost about $260 billion when it was passed as part of a $2 trillion coronavirus relief package.
States, meanwhile, delivered just over $21 billion in benefits in April, up from about $4 billion the month before.
The combined $48 billion paid out in April is the equivalent of more than triple the amount distributed at the monthly peak of the Great Recession, after adjusting for inflation, according to a new report from The Hamilton Project at Brookings Institution.
Unemployment benefits offset a small portion of personal income decline in March, but roughly half of lost wages and salaries in April, according to the researchers’ preliminary calculations.
As more Americans join and remain on the unemployment insurance program, spending will continue to skyrocket. The outlays to date show that states have struggled to handle the surge in claims and to implement the federal provisions, said Ernie Tedeschi, an economist at Evercore ISI and former Treasury official.
“States have been slow to integrate the new emergency payments for regular unemployment insurance beneficiaries, and states have been super slow in implementing the brand new PUA benefits,” said Tedeschi. “This shows states have catching up to do.”
