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New Analysis: California Unemployment Claims Surged in August, Driven in part by Questionable Increase in PUA Claims

Sacramento, Sept 15, 2020 — A new analysis of Unemployment Insurance (UI) claims filed in August by the California Policy Lab at UCLA and the Labor Market Information Division at the California Employment Development Department sheds light on the rapid increase in initial Pandemic Unemployment Insurance claims, the skyrocketing number of Continuing UI Claims, and provides insights on the state of the California labor market. While part of the dramatic increase in claims was driven by a concerning surge of potentially fraudulent PUA claims that the Employment Development Department is investigating, other indicators paint a mixed picture of the recovery.

“The large rise in the number of new UI claims and steep increases in Continuing Claims are likely affected by fraud, but by using new metrics that go beyond these numbers, we are able to shed light on the true state of California’s labor market,” explains Till von Wachter, a co-author of the analysis, UCLA economics professor and faculty director at the California Policy Lab. “Our analysis paints a mixed picture of the recovery: new initial claims for regular UI (not counting PUA) fell below the Great Recession peak for several weeks in a row, a first in this crisis and a positive sign. Another positive sign is that our new measure of how many people are receiving UI benefits for a given week also continued to trend downwards. This measure is a more accurate reflection of the true state of the labor market because unlike the published continuing claims numbers, it is less likely to be skewed by the recent surge of backdated claims.

On the other hand, additional claims held steady at a very high level, indicating there were still a large number of individuals experiencing repeat layoffs in August. We also see some indication that the demographics of new claimants are shifting, with recent claimants more likely to be male, older, and more highly educated. Notably, this trend is occurring not only among PUA claimants (a trend which may be affected by fraud), but also among claimants for regular UI – a sign that typically more stable workers may now be losing jobs.”

Key research findings:
• California saw a surge in initial claims for PUA in August that led to the highest weekly count since the start of the PUA program. A steep upward trend in initial claims between August 16th and August 29th was driven by a surge in PUA claims, with well over twice as many new PUA claims filed in the week ending August 29th than were filed just two weeks prior. The California Employment Development Department is investigating this surge amid possible fraud concerns.

• Initial claims for regular UI also surged in late August, albeit less pronounced than PUA. The week ending August 29th saw the largest week-over-week increase in regular claims since mid-June. Prior to this, however, the state experienced five consecutive weeks of a decrease in the number of new initial claims – a measure which excludes individuals re-opening unexpired claims after having returned to work temporarily.

• A dramatic and recent increase in the number of payments processed each week (often called “Continuing Claims”) has been driven by a rise in claimants certifying retroactively for multiple weeks of benefits. This means the number of continued claims in recent weeks is considerably greater than the number of people actually receiving payments for unemployment experienced in those same weeks. The increase in retroactive payments has been primarily driven by new PUA claimants certifying for benefits for weeks of unemployment experienced back to the earlier stages of the crisis. The average number of payments each PUA claimant has certified for has risen from about four weeks in June to over eight weeks of payments more recently.

• The spike in initial claims during August coincided with a shift in demographics. Relative to July, new claimants are older and more educated, and the racial compositions of claimants is also shifting towards more White claimants and fewer Hispanic claimants. The shift is driven by both an increasing share of PUA claimants, and a demographic shift within the group of PUA claimants. Similar demographic shifts also occurred within the group of regular UI claimants but to a lesser extent.

• The education sector saw a spike in claims near the end of August, with the share of new claims originating from this sector reaching its highest level since the end of last school year in the spring of 2020. School employees returning from summer break who find that their jobs for the fall no longer exist are now eligible to claim benefits. Although teachers in such situations would not be eligible for retroactive benefits for the summer period, other school employees technically referred to by EDD as “non-professional” employees (such as aides and custodians) may be.

• Throughout the summer, claimants of regular UI have been roughly five times more likely to exit UI in any given week than those receiving PUA benefits. We define “exit” rates as the share of individuals potentially eligible for benefit payment in a given week who subsequently fail to certify for the next two weeks. We also show that these exit rates are substantially lower among Black workers and workers in the Food Service industry

• Exit rates have been substantially higher among claimants who had reported they expected to be recalled to work by their employers. During May and June, about 5% of claimants who indicated they expected recall exited UI in each week, compared to only 3% of claimants who indicated they did not expect to be recalled.

• The number of workers receiving unemployment benefits remains startlingly high. Over 3.5 million claimants, or 19% of the state’s labor force, were paid benefits for unemployment experienced in the week ending August 15th. Since the start of the COVID-19 crisis in mid-March, 7.5 million unique California claimants, or nearly 39% of the California workforce, have filed for UI benefits. The number of unique claimants during this period is 29% less than the more frequently cited count of claims, which stands at 10.6 million, because of individuals filing for multiple claims during the crisis.

• Evidence on the state of the labor market from additional claims, partial UI claims, and benefit denial due to excess earnings signal a weakening of the recovery. Weekly additional claims – claims which are “reopened” after a claimant’s temporary return to work – have held steady at a high level and represent about 50% of regular initial claims in the week ending August 29th. Between late June and mid-August, the share of paid claimants receiving partial benefits or being denied benefits because of excess earnings dropped substantially among the most sectors most impacted by the crisis. Among others, this indicates a rising share of claimants who are not simply seeing reduced hours, but have been fully laid off (at least temporarily).

The analysis is based on analyzing initial unemployment insurance claims and continuing unemployment insurance claims from February 2020 (before the COVID-19 crisis impacted the labor market), through the start of the employment crisis in mid-March (when initial UI claims increased dramatically), up to more recently until August 29th. The analysis complements traditional survey-based indicators on the labor market, which have detailed information but large time lags and lower frequently, and to weekly publications of the number of total UI claims, which have minimal time lags but which lack the detail available in this analysis. This analysis will be updated on a regular basis with new data on initial Unemployment Insurance claims to provide a timely and detailed analysis of the impacts of COVID-19 on California’s labor market.

The California Policy Lab creates data-driven insights for the public good. Our mission is to partner with California’s state and local governments to generate scientific evidence that solves California’s most urgent problems, including homelessness, poverty, crime, and education inequality. We facilitate close working partnerships between policymakers and researchers at the University of California to help evaluate and improve public programs through empirical research and technical assistance.

The Labor Market Information Division (LMID) is the official source for California Labor Market Information. The LMID promotes California’s economic health by providing information to help people understand California’s economy and make informed labor market choices. We collect, analyze, and publish statistical data and reports on California’s labor force, industries, occupations, employment projections, wages and other important labor market and economic data.

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