President Biden inherits a weak labor market due to inadequate COVID-19 response: Biden and Congress must make stimulus its first priority
This morning, the Department of Labor (DOL) released some of the last unemployment insurance (UI) claims data of the Trump era. That means this release helps us understand the economy President Biden just inherited. Here’s what it shows.
Another 1.3 million people applied for UI benefits last week, including 900,000 people who applied for regular state UI and 424,000 who applied for Pandemic Unemployment Assistance (PUA). The 1.3 million who applied for UI last week was an increase of 113,000 from the prior week. The increase underscores that layoffs are increasing as the virus surges. The four-week moving average of total initial claims is now back to where it was in mid-October.
Last week was the 44th straight week total initial claims were greater than the worst week of the Great Recession. (If that comparison is restricted to regular state claims—because we didn’t have PUA in the Great Recession—initial claims last week were still greater than the worst week of the Great Recession.) I should note that throughout this post I use seasonally adjusted data where I can, but for comparisons to the Great Recession I use not-seasonally-adjusted data, since DOL’s improved seasonal adjustments aren’t available before the week ending August 29, 2020.
Most states provide just 26 weeks of regular benefits, so many workers are exhausting their regular state UI benefits. In the most recent data (the week ending January 9), continuing claims for regular state benefits dropped by 127,000. After a worker exhausts regular state benefits, they can move onto Pandemic Emergency Unemployment Compensation (PEUC), which is an additional 24 weeks of regular state UI (the December COVID-19 relief bill increased the number of weeks of PEUC eligibility by 11, from 13 to 24).
However, in the most recent data available for PEUC, the week ending January 2, PEUC claims dropped by 1.1 million. I expect that to reverse in coming weeks. Why? Over 3.5 million people had exhausted the original 13 weeks of PEUC by the end of December (see column C43 in form ETA 5159 for PEUC here). These workers are eligible for the additional 11 weeks, but they need to recertify. PEUC numbers will swell dramatically as this occurs. It’s worth noting that in some states, if workers had exhausted their original 13 weeks of PEUC, they could get on yet another program, Extended Benefits (EB). In the latest data, the number of workers on EB increased by 83,000. Workers on EB will stay on EB until they exhaust their EB benefits before switching back to PEUC for the additional 11 weeks of PEUC eligibility.
Continuing claims for PUA also dropped dramatically—by 1.7 million—in the latest data, the week ending January 2. This drop can also be expected to reverse in coming weeks. The December COVID-19 relief bill extended the total weeks of eligibility for PUA by 11, from 39 to 50 weeks. As workers who saw a temporary lapse in PUA get back on the program, we can expect the PUA numbers to swell.
The 11-week extensions of PEUC and PUA just kick the can down the road—they are not long enough. Congress must provide longer extensions, or millions will exhaust benefits in mid-March, when the virus will still be surging and the labor market will still be weak.
Figure A shows continuing claims in all programs over time (the latest data are for January 2). Continuing claims are still nearly 14 million above where they were a year ago, even with the recent temporary lapses in PUA and PEUC occurring during the time period covered by this chart.
Continuing unemployment claims in all programs, March 23, 2019–January 2, 2020: *Use caution interpreting trends over time because of reporting issues (see below)*
|Date||Regular state UI||PEUC||PUA||Other programs (mostly EB and STC)|
Click here for notes.
Click here for notes.
Data are not seasonally adjusted. A full list of programs can be found in the bottom panel of the table on page 4 at this link: https://www.dol.gov/ui/data.pdf.
There are now 26.8 million workers who are either unemployed, otherwise out of work because of the virus, or have seen a drop in hours and pay because of the pandemic. Further, we started losing jobs again in December; layoffs are rising and the virus is surging. More relief is desperately needed. A key reason more relief is so important is that this crisis is greatly exacerbating racial inequality. Due to the impact of historic and current systemic racism, Black and Latinx workers have seen more job loss in this pandemic, and have less wealth to fall back on. To get the economy back on track in a reasonable time frame, we need policymakers to pass an additional roughly $2 trillion in fiscal support. In particular, it is crucial that Congress provide substantial aid to state and local governments. Without this aid, austerity by state and local governments will result in cuts to essential public services and the loss of millions of jobs in both the public and private sectors.
President Biden announced a relief and recovery package last week that gets the economics right; his proposal is at the scale of the economic challenge we are facing and is a clear break from the mistakes we have made in past recoveries, when we hobbled the economy by not doing enough. And with their new majority in the Senate, Democrats will now be able to get more relief measures through reconciliation. Top priorities are aid to state and local governments, additional weeks of UI, and increased UI benefits.
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