October 9, 2020
As a result of the COVID-19 pandemic, California has experienced an unprecedented rise in unemployment. Early in the economic downturn, the key measure that captured the impact of the virus on the state’s workers was the number of new unemployment claims being filed each week. At this stage, however, the level of continued claims—the total number of people receiving unemployment benefits each week—is equally important. Should continued claims decline, it could signal that some businesses are bringing workers back and the economy is improving. Should continued claims rise, however, it could signal a continued slowdown in the economy. Note: This post includes data on claims paid under Pandemic Unemployment Assistance (PUA)—a new program that provides unemployment insurance for self-employed workers. We recently became aware of an unknown but potentially large level of fraudulent activity within the program. We therefore caution against drawing conclusions about the labor market from PUA claims data.
Department Not Accepting New Applications During Planned Two-Week Reset. In response the Governor’s Strike Team recommendations to address the backlog of pending claims at the Employment Development Department (EDD), the department shut down incoming applications for unemployment benefits for two weeks while it redirects experienced staff to working down the backlog. (For more information about the strike team recommendations, see our recent handout "Overseeing Improvements at the Employment Development Department During COVID-19.") As such, EDD reported few new applications the week ending October 3 (the second and final week of the two-week reset). During the reset period, however, existing claims continue to be processed by experienced EDD staff.
Department Continues to Process Elevated Level of Unemployment Claims. During the second week of the two-week reset, between September 27 and October 3, the department reported processing 226,176 claims for regular unemployment insurance. This is the same amount as the prior week (the first week of the two-week reset) and therefore may reflect a placeholder figure and not actual workload completed. Our office will update these figures when they become available next week.
Following New Certification Rules, Caseload for Self-Employment Benefits Fall Sharply. During August and early September, new claims for the federal Pandemic Unemployment Assistance (PUA) program for self-employed workers spiked unexpectedly, as shown in the figure. To limit potentially fraudulent claims, the administration recently stopped automatically approving backdated PUA claims. Incoming data from the past three weeks suggest this change has discouraged fraudulent claims. First, newly processed PUA claims fell by more than 80 percent over the past four weeks. Second, during last week, benefit payments distributed to self-employed workers declined, falling from $1.3 billion to $1.0 billion. Finally, the number of workers receiving self-employment UI benefits also fell by nearly 20 percent over the past three weeks. Taken together, this information suggests that EDD’s new certification restriction is reducing the volume of new claims and benefit payments. Although it seems plausible, it remains too early to say definitively whether this decline is due primarily to a reduction in fraudulent activity.
Regular Continued Claims Continue Slow Decline, Falling to 3.2 Million. As of October 3, as shown in the figure above, California had 3.2 million employees receiving regular unemployment benefits. This represents a continuation of the slow decline seen in recent weeks. Since the regular claims caseload peaked in mid-August, the number of workers receiving normal UI benefits has fallen by nearly 10 percent.
Fourth and Fifth Round of Benefits Paid from New Federal Lost Wages Assistance Program. Benefit payments from the federal Lost Wages Assistance program, which allows states to temporarily increase weekly benefits by $300, were paid out for the fourth and fifth time last week. As shown in the figure, the state distributed roughly $1.5 billion in federal benefits under this program during the week ending October 3. This amount corresponds approximately to the fourth and fifth weeks of six weekly add-on benefits approved by the federal government. In total, these payments will go to workers who were unemployed during the weeks ending August 1 through the week ending September 5. Including these new federal benefit payments, overall, federally funded benefits represent nearly three-quarters of the $98 billion in UI benefits that have been distributed since the beginning of the pandemic.