Over the last week, I have been consumed with pain and anger over the police murders of George Floyd and so many other Black people—murders rooted in a long history of white supremacy and lynchings in the United States. That long history of white supremacy has profound effects on the labor market. For example, recessions hit Black workers harder than white workers because of dynamics like occupational segregation, discrimination, and other labor market disparities rooted in systemic racism. In this post, I am going to talk about today’s release of unemployment insurance data. These data highlight the deep recession we are now in—a recession that will exacerbate existing racial inequalities by causing greater job loss and income declines in Black households than white households.
Last week, 2.2 million workers applied for unemployment benefits. This is the 11th week in a row that initial unemployment claims have been more than twice the worst week of the Great Recession.
Of the 2.2 million who applied for unemployment benefits last week, 1.6 million applied for regular state unemployment insurance (UI), and 0.6 million applied for Pandemic Unemployment Assistance (PUA). PUA is the new federal program for workers who are out of work because of the virus but who are not eligible for regular UI (e.g., the self-employed). At this point, only 36 states and Puerto Rico are reporting PUA claims. This means PUA claims are still being undercounted.
Many commentators are reporting the cumulative number of initial regular state UI claims over the last 11 weeks as a measure of how many people have applied for UI in this pandemic. At this point, I believe we should abandon that approach because it ignores PUA—and is thus an understatement on that front—but may overstate things in other ways (for example, some who were laid off and applied for UI two months ago may now be going back to work). Instead, we can calculate the total number of workers who are either on unemployment benefits, or have applied and are waiting to see if they will get benefits, in the following way:
A total of 19.3 million workers had made it through at least the first round of regular state UI processing as of May 23 (these are known as “continued” claims), and 3.5 million had filed initial UI claims on top of that but had not yet made it through the first round of processing. And, 10.7 million workers had made it through at least the first round of PUA processing by May 16, and 3.2 million had filed initial PUA claims on top of that but had not yet made it through the first round of processing. Even further, by May 16, another 436,000 workers had made it through at least the first round of processing in one of the other unemployment benefits programs, the largest of which are Pandemic Emergency Unemployment Compensation—which is available to workers who have exhausted their regular state benefits—and Short-Time Compensation (more on that below). Altogether, that’s 37.2 million workers who are either on unemployment benefits or who have applied very recently and are waiting to see if they will get benefits—61.4% UI, 37.4% PUA, and 1.2% other programs. Together, that is close to one in four people in the U.S. workforce.
Short-Time Compensation (STC)—also known as work-sharing—is an alternative to layoffs for employers who see a drop in demand for their goods or services. STC allows employers to reduce hours of work for their workers rather than laying some workers off. Under STC, workers who have their hours reduced get partial UI. Unfortunately, the STC infrastructure is not well developed and many states do not even have an STC program. STC would ideally be being used extensively right now to save jobs, but—while it is ramping up—the levels remain very low. On May 16, just 193,938 workers were receiving STC. Additional aid to states should be provided to implement, improve, and promote STC programs.
It is worth noting that initial claims for UI and PUA should be completely non-overlapping because that is how the Department of Labor has directed state agencies to report them. However, some states may be misreporting initial claims. It is also worth noting that I focus on the not-seasonally-adjusted numbers for regular state UI claims because the way DOL does seasonal adjustments of unemployment insurance claims data is distortionary at a time like this. Claims from all other programs, including PUA, are only available on an unadjusted basis.
Policymakers need to do much, much more to fight this recession and set our economy up for a strong recovery, which will not happen without intervention. For example, a prolonged depression is virtually guaranteed without significant federal aid to state and local governments. Further, the across-the-board $600 increase in weekly unemployment benefits, which was one of the most effective parts of the CARES Act on both humanitarian and economic grounds, should be extended well past its expiration at the end of July—until unemployment is falling rapidly and is at a manageable level.
Congress knows that recessions hit Black households harder, and it also knows that it has the power to take action that will weaken the recession and strengthen the recovery. If it doesn’t act, it will be yet another assault on Black people.