Here’s why there’s a backlog of claims for unemployment and why it’s only getting worse.
Nathaniel Gee has been struggling to get by on unemployment aid during the coronavirus pandemic, especially after going five weeks without the $600 weekly federal unemployment supplement.
Gee, who lives in Milwaukee, Wisconsin, was furloughed from his job as a school bus driver in March. He still hasn’t been able to find full-time work with schools doing virtual learning.
He’s worried about how he’ll make ends meet with rent, groceries and medications in the coming months if Congress doesn’t pass another coronavirus relief package soon with extended jobless benefits. The maximum state benefit in Wisconsin is $370, which covers about 40% of Gee’s prior wages, he says.
“It’s been a huge income shock,” says Gee, 37, who tested positive for the coronavirus in July and had lingering fatigue for weeks. “I’m wiped out financially. I’m living on a shoestring budget.”
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About 833,352 Americans filed first-time applications for unemployment insurance during the week ending Aug. 29, the Labor Department said Thursday, a 7,591 rise from the prior week and slightly more than the 825,000 expected by economists at J.P. Morgan. Those figures are based on non-seasonally adjusted figures.
The number of people seeking unemployment came as parts of the economy remained shuttered due to COVID-19 and millions of out-of-work people have gone more than a month without the additional $600 in jobless aid.
The data comes ahead of Friday’s closely watched jobs report for August. Those figures are expected to show that 1.4 million workers returned to work last month, according to Oxford Economics. That would leave about one out of two laid-off workers still unemployed. The unemployment rate is expected to fall to 9.7%, down from 10.2% in July.
To be sure, the labor market has continued to show signs of improvement in recent months, although the pace of progress has likely slowed further from the strong initial bounce in May and June, economists say. A trend of slow improvement is a worrisome sign for the recovery, economists warn.
“This latest report adds to a growing list of indicators pointing towards an overall plateau and a long road still ahead for the labor market,” Daniel Zhao, senior economist at Glassdoor, said in a note.
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USA TODAY is using non-seasonally adjusted jobless claims numbers for the first time during the pandemic because, starting with last week’s figures, the Labor Department has switched to a different method to adjust the data to account for seasonal factors. The old method resulted in large seasonal adjustments that overstated the number of claims filed during the crisis.
USA TODAY has chosen to use the non-seasonally adjusted – or actual – claims numbers so it can better compare figures released Thursday, and in the weeks ahead, with previous totals. Keep in mind that the non-seasonally adjusted numbers will likely result in significantly fewer claims than the seasonally adjusted figures, which have totaled about 1 million in recent weeks, but that doesn’t reflect the actual change in the number of claims filed.
Seasonally adjusted, about 881,000 Americans filed first-time applications for unemployment insurance during the week ending Aug. 29, the Labor Department said, a 130,000 drop from the prior week.
The combination of slow employment progress and poor public health conditions, along with the absence of another stimulus package with extended unemployment aid, threatens to jeopardize consumer spending in the coming months, a vital part of U.S. growth since it accounts for more than two-thirds of economic activity.
“Any stagnation or backpedaling of unemployment claims at such historic highs is severely troubling at this stage of a recovery and will likely remain as recent natural disasters across the U.S. compound with announced layoffs from several large employers,” Zhao says.
Jobless claims remain elevated as more than 25 million unemployed Americans have gone five weeks without the $600 weekly federal unemployment supplement. After coronavirus aid talks hit a stalemate in Congress, Trump called for a $300-per-week federally funded jobless benefit for workers who were unemployed due to the pandemic, with states asked to provide another $100 a week.
The Federal Emergency Management Agency will run the relief program through its Disaster Relief Fund. But Americans may just get a few weeks’ worth of payments, leaving millions without the additional benefits again in just a matter of weeks, with Congress in recess until Labor Day. States applying for the federal grants will get an “initial obligation of three weeks of needed funding,” according to a recent memo issued by the agency.
States are working to reconfigure their systems to distribute $300 per week in federal aid to unemployed Americans. So far, only seven – Arizona, Louisiana, Massachusetts, Missouri, Montana, Tennessee and Texas – have paid lost wages assistance as of Wednesday, representing about 15% of all unemployed workers, according to The Century Foundation, a nonprofit think tank.
About 32 other states haven’t started payments yet, but have seen grants awarded by FEMA, and 11 states haven’t been awarded grants yet.
“The nation remains months or even years away from digging out from our jobs hole, as the absence of fiscal stimulus for state and local governments, small businesses, and households stymies recovery efforts,” Andrew Stettner, senior fellow at The Century Foundation, said in a note.
Wisconsin, where Gee lives, was approved to provide an additional $300 a week in federal aid for three weeks to those receiving unemployment due to lost wages from the pandemic. And additional weeks of funding will be determined on a weekly basis afterwards.
But the state warned it could take eight weeks to reprogram the state’s unemployment system to disperse the funds, which adds to Gee’s concerns about paying rent over the next few months.
“It’s absurd. Now we have to possibly wait two more months before we see as little as three weeks worth of money,” says Gee. “I’m angry at Congress for not getting anything done.”
Economists have been focusing more closely on continuing claims, which represent all Americans still receiving benefits with a one-week lag. It reflects all those still unemployed and accounts for people who have returned to work as businesses have reopened. Continuing claims also have trended lower, with non-seasonally adjusted continuing claims falling to 13.1 million, a drop of 764,713 from the prior week.
The number of people collecting state benefits on a continued basis, which is down only 43% from its pandemic peak, is still more than two times higher than the pre-pandemic record, according to Stettner.
State reopenings, however, have had a marginal impact on workers returning to their jobs, economists say. About 13 million jobs still remain lost during the coronavirus recession, and permanent layoffs have grown after struggling businesses were forced to lay off workers for a second time.
Oxford Economics estimates that the August unemployment report would leave the level of employment more than 8% below its pre-recession level and the economy still short of 11 million jobs compared with February.
Contributing: Paul Davidson
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