- In just six weeks, 30 million Americans have filed for unemployment insurance as coronavirus layoffs continue.
- That may be an undercount of how many Americans are actually out of work due to the coronavirus pandemic.
- Studies have shown that people have struggled to file claims or haven’t even tried because of the difficulty of applications.
- Slow rollouts of expanded Pandemic Unemployment Assistance may have delayed claims from millions of workers who are now eligible for benefits.
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Job loss stemming from the coronavirus pandemic has been devastating. Economists think there are likely more without jobs that haven’t been captured by the data.
What has been reported so far paints a gloomy picture. In just six weeks, 30 million Americans have filed for unemployment insurance. Each weekly report since mid-March has been in the millions – multiple times higher than the worst week of the Great Recession, when 665,000 filed for unemployment insurance.
It took only four weeks of the coronavirus pandemic to erase all jobs created since the Great Recession. Now, there are millions more unemployed, signalling that the economic downturn from the coronavirus pandemic will be severe.
As terrible as the job loss numbers are, they are only part of the picture. There could be more Americans unemployed, according to economists, as not everyone who lost work has been able to file for benefits.
A complicated application process
A survey conducted in mid-April by the Economic Policy Institute found that for every 10 people who successfully filed a claim for unemployment insurance, three to four tried to file but were unable to get through the system. In addition, two more didn’t try to apply for UI at all because it was too difficult.
“These findings imply the official count of unemployment insurance claims likely drastically understates the extent of employment reductions and the need for economic relief during the coronavirus crisis,” wrote Ben Zipperer and Elise Gould of the EPI.
Accounting for the workers who were unable to apply for unemployment, or tried but didn’t get through, the EPI survey found that only about half of potential UI applicants are actually receiving benefits.
Applying those findings to the five weeks of unemployment claims from March 15 to April 18, the EPI estimates an additional 8.9 million to 13.9 million could have filed for claims if the process had been easier.
To be sure, unemployment benefits have been expanded to include more Americans than ever before. The CARES Act signed into law by President Donald Trump at the end of March extended unemployment benefits to millions of Americans who would have been otherwise ineligible, including gig workers, freelancers, and those who are self-employed.
This is important, because these groups of non-traditional workers have expanded in the last decade. In 2019, 35% of the workforce freelanced, or 57 million people, up from 53 million in 2014, according to a survey by the Freelancers Union. The share of gig workers at US businesses has grown 15% since 2010, a study from the ADP Research Institute showed.
But, there have been problems implementing the new program established by the CARES Act, called Pandemic Unemployment Assistance. At the end of April, only 21 states had started paying out benefits to self-employed and gig workers, according to the Labour Department.
And, states have been delayed in taking in claims filed for the program. Florida, for example, did not begin accepting applications under PUA until Tuesday, Politico reported.
In mid-April, the new system Pennsylvania put in place for PUA crashed due to a flood of new applications, the Philadelphia Inquirer reported Thursday. New York’s system crashed as well following a huge surge in claims, Gov. Andrew Cuomo said in a briefing April 21.
Gaps in the data
There are also quirks in the data calculation and collection that sometimes yield results that may not show the full picture. Next week, the April jobs report will be released, including nonfarm payroll information and an updated unemployment rate.
As of April 18, economists estimated that the unemployment rate likely spiked to about 20.2% given the surge in UI claims. The next week, however, economists forecast an unemployment rate of 16%, even though claims rose by 3.8 million.
This is not because the situation has gotten any better; it’s instead the way the data is calculated. To be included in the unemployment count, people have to say that they are actively looking for work. Under the expanded benefits from the CARES Act, people do not have to be actively looking for employment to receive a check, and because of the health crisis, many have put job searches on hold.
That technically lowers the unemployment rate, meaning what will be reported for April could be an underrepresentation of how many people are actually out of work in the US.
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There could also be further issues with the survey, which depends on the people filling it out to accurately answer questions about employment. Sometimes, as with any survey, respondents don’t interpret or answer the questions as intended.
In March, the Bureau of Labour Statistics noted that the unemployment rate would have been one percentage point higher – 5.4% instead of 4.4% – if those who marked themselves temporarily absent from work due to “other reasons” had said they were unemployed on temporary layoff.
What widespread unemployment means for an economic recovery
The consequences of such widespread unemployment are dire. Current data shows about one in five American workers is without a job, and as UI claims continue to roll in in the millions, the share will increase.
If the alarming rate of layoffs continues, it’s likely that about half of American workers will be without a paycheck in May, according to ING international economist James Knightley.
It’s widely accepted that the US is in a recession, especially after first-quarter gross domestic product fell at a 4.8% annualized rate before the worst months of the coronavirus crisis.
Now, economists are weighing what type of recovery may take place. The sweeping unemployment is foreboding, given that US consumption is roughly 70% of GDP. The longer that workers go without paychecks, the longer it will take for the economy to recover.
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