Joblessness remains at historic levels: The extra $600 in UI benefits expires next week—Congress must extend it
Last week, 2.4 million workers applied for unemployment insurance (UI) benefits. This is the 17th week in a row that unemployment claims have been more than twice the worst week of the Great Recession. Of the 2.4 million workers who applied for UI, 1.5 million applied for regular state unemployment insurance (not seasonally adjusted), and 0.9 million applied for Pandemic Unemployment Assistance (PUA).
Many headlines this morning are saying there were 1.3 million UI claims last week, but that’s not the right number to use. For one, it ignores PUA, the federal program for workers who are not eligible for regular UI, like gig workers. It also uses seasonally adjusted data for regular state UI, which is distorted right now because of the way Department of Labor (DOL) does seasonal adjustments.
Before I cover more of the details of today’s UI release, I want to take a moment to note that the across-the-board $600 increase in weekly unemployment benefits is set to expire next week.
Many are talking about the potential work disincentive of the extra $600, since the additional payment means many people have higher income on unemployment insurance than they did in their prior job. The concern about the disincentive effect has been massively overblown. First, it ignores the realities of the labor market for working people, who will be unlikely to turn down a permanent job—particularly in a time of extended high unemployment—for a temporary boost in benefits.
Further, there are 14 million more unemployed workers than job openings, meaning millions will remain jobless no matter what they do. Cutting off the $600 cannot incentivize people to get jobs that aren’t there.
Even further, many are simply unable to take a job right now no matter how much benefits are cut, because it’s not safe for them or because they have care responsibilities as a result of the coronavirus. Cutting off the $600 will not incentivize them to get jobs; it will just cause hardship.
The millions who will remain jobless after the extra $600 is cut off will have no choice but to drastically cut their spending, causing a sharp decline in their living standards, an increase in poverty, and completely unnecessary suffering.
Cutting off the $600 will also exacerbate racial inequality. Black communities are suffering more from this pandemic—both physically and economically—as a result of, and in addition to, systemic racism. Black communities will suffer even more if the $600 expires.
And of course, letting the $600 expire won’t just hurt UI recipients and their families; it will hurt millions more. The spending generated by that $600 is supporting over 5 million jobs. That means letting the $600 expire would cost more than 5 million jobs. Figure A shows how many jobs will be lost in each state if the extra $600 is allowed to expire.
If the $600 weekly unemployment insurance increase is allowed to expire, how many jobs will it cost over the next year?: Jobs cost as a level and as a share of employment
|State||Jobs cost||Jobs cost, as a share of employment|
Notes: We take the relationship between the unemployment rate and the boost to personal income from the extra $600 payment that held in May of 2020 and assume it continues going forward as benefits are extended past July. We apply a multiplier of 1.5 to the personal income boost provided by enhanced UI. We then divide this boost by overall GDP, and apply the resulting percentage change to the average level of employment in the first quarter of 2020 to get an implied employment boost. The numbers in the chart are the average boost to personal income, GDP, and employment between the third quarter of 2020 and the second quarter of 2021. Some quarters would see even larger effects.
Source: Author’s analysis based on data from the National Income and Product Accounts (NIPA) data from the Bureau of Economic Analysis (BEA), projections from the Congressional Budget Office (CBO), data on continuing unemployment insurance claims from the Department of Labor (DOL), and total nonfarm employment from the Bureau of Labor Statistics (BLS) Current Employment Statistics (CES).
If policymakers really are worried about the disincentive effect of the extra $600, they should address that issue in another way—not cut off the additional payment, which is far too important. Instead, they could, for example, let people keep some of their UI when they go back to work. And Congress needs to move fast. If they let the extra payments expire and then reinstate them, it will be an unnecessary administrative nightmare for state agencies, and recipients will face a lapse in benefits of two to four weeks (even if benefits are reinstated right away).
Figure B shows continuing claims in all programs over time (the latest data are for June 27). Continuing claims are more than 30 million above where they were a year ago. The latest figure in “other programs” in Figure B is 1.3 million claims. Most of this (0.9 million) is Pandemic Emergency Unemployment Compensation (PEUC). PEUC is the additional 13 weeks of benefits provided by the CARES Act for people who have exhausted regular state benefits. The number of people on PEUC can be expected to grow dramatically as the crisis drags on and more of the nearly 17 million people currently on regular state benefits exhaust their regular benefits and move on to PEUC.
Continuing unemployment claims in all programs: January 4, 2020–June 27, 2020
|Regular state UI||PUA||Other programs (mostly PEUC and STC)|
Notes: Pandemic Unemployment Assistance (PUA) is the federal program for workers who are out of work because of the virus but who are not eligible for regular state unemployment insurance benefits (e.g., the self-employed). “Other programs” includes Pandemic Emergency Unemployment Compensation (PEUC), Short-Time Compensation (STC), and others; a full list can be found in the bottom panel of the table on page 4 at this link: https://www.dol.gov/ui/data.pdf.
“Other programs” in Figure B also includes Short-Time Compensation (STC). The number of workers on STC ticked down in the latest data, after having risen for 14 weeks straight in this crisis. This is not good news. STC is a great program to prevent layoffs where employers reduce work hours rather than lay off workers, and workers get partial UI. However, STC is massively underutilized (there are only 342,666 workers on STC in the latest data, roughly 1% of all people on unemployment benefits). It should be being used more, not less.
Figure B only covers continuing claims through June 27, but Figure C combines the most recent data on both continuing claims and initial claims to get a measure of the total number of people “on” unemployment benefits as of July 11. DOL numbers indicate that right now, 36.4 million workers are either on unemployment benefits, have been approved and are waiting for benefits, or have applied recently and are waiting to get approved. That is more than one in five workers. But a note of caution: While regular state UI and PUA claims should be completely nonoverlapping—that is how DOL has directed state agencies to report them—some states may be misreporting claims, so there may be some double counting. Further, some states may be including some back weeks in their continuing claims.
DOL reports that 36.4 million workers are either on unemployment benefits or have applied and are waiting to see if they will get benefits: July 11, 2020
|Regular state UI: Continued claims||Regular state UI: Initial claims||PUA: Continued claims||PUA: Initial claims||Other programs (mostly PEUC and STC)||Total|
Notes: Non-seasonally adjusted data are used throughout. Regular state UI continued claims are for the week ending July 4; regular state UI initial claims are for the week ending July 11. PUA continued claims are for the week ending June 27; PUA initial claims are for the weeks ending July 4 and July 11. "Other programs" are continued claims in other programs for the week ending June 27.
Notes: Non-seasonally adjusted data are used throughout. Regular state UI continued claims are for the week ending July 4; regular state UI initial claims are for the week ending July 11. PUA continued claims are for the week ending June 27; PUA initial claims are for the weeks ending July 4 and July 11. "Other programs" are continued claims in other programs for the week ending June 27. Initial claims are in the first round of processing. Continued claims have made it through at least the first round of processing. Pandemic Unemployment Assistance (PUA) is the federal program for workers who are out of work because of the virus but who are not eligible for regular state unemployment insurance (UI) benefits (e.g. the self-employed). "Other programs" includes PEUC, STC, and others; a full list can be found in the bottom panel of the table on page 4 at this link https://www.dol.gov/ui/data.pdf. Continued claims for PUA and UI should be non-overlapping , and initial claims for PUA and UI should also be non-overlapping (at least that is how DOL has directed agencies to report them—some states may be misreporting). Further, some states may be including some back weeks in their continuing claims reports.
Source: Department of Labor (DOL) Unemployment Insurance Weekly Claims (News Release), retrieved from DOL, https://www.dol.gov/ui/data.pdf, July 16, 2020.