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Sacramento, July 2, 2020— A new analysis of Unemployment Insurance (UI) claims in California by the California Policy Lab at UCLA and the Labor Market Information Division at the California Employment Development Department shows that while initial claims to UI are again trending upwards, the number of UI claimants experiencing unemployment fell slightly from May to early June.
The report provides a novel measure of the labor market, counting the number of individuals participating in UI for a given week of unemployment, as opposed to analyzing claims by the week a payment is certified, a less-precise measure often used in other reports. Using this measure, the research team found that the number of unemployed individuals on UI peaked for unemployment experienced during the week ending May 2nd (just under four million individuals), and has trended downwards since then, with three million individuals receiving payment for unemployment experienced during the week ending June 6th.
The report shows that with over one in six workers in the state participating in the Unemployment Insurance program, a decision about whether to keep the $600/week Federal Pandemic Unemployment Compensation (FPUC) benefits – set to expire next month – will be critical for millions of workers in the state. Without these FPUC benefits, over half of claimants in the state (1.5 million individuals) would receive a weekly benefit amount falling below the Federal Poverty Line (FPL), and an even larger number would be considered “very poor” by Department for Housing and Urban Development (HUD) standards.
“Allowing FPUC payments to expire could be devastating for millions of workers,” explains Till von Wachter, a co-author of the analysis, UCLA economics professor and faculty director at the California Policy Lab. “Without these payments, the typical UI claimant would only receive $330 per week. For policymakers worried about the disincentive effects of continued assistance, a better mechanism to address this concern would be to increase the amount of money people can earn and still qualify for partial unemployment, effectively allowing claimants to keep a higher share of their earnings from any part-time opportunities they may have available to them as the economy slowly re-opens.”
The uncertainty surrounding the COVID-19 pandemic may be affecting new claimant’s expectations of being recalled to their employer. While recall expectations declined in April and May after peaking in late March, that trend has reversed course in June, with more people (75% of all initial UI claimants from June 7th to June 20th) reporting that they expect to be recalled. However, a gap in expectations has re-emerged recently, with Black claimants reporting lower recall rates (67%) than other workers.
The report finds that the labor market crisis has been more severe for some demographic groups than others, with women, younger workers, Hispanic workers, and Black workers making up a disproportionate share of initial claimants relative to their share of the labor force. Since the start of the crisis, over one in three women, close to one in two members of Generation Z, and almost two out of three workers with a high school degree have filed for benefits.
New in this analysis: This policy brief focuses on the number of claims for UI that have been paid during the COVID-19 crisis, how it compares to labor force and unemployment, and who benefits most from FPUC. The research teams also continues to report that an elevated number of claimants’ UI benefits are being either reduced or denied altogether because of their earnings. While this is a positive indicator for the overall economic outlook, this analysis also highlights that programs like Work Sharing could cushion the economic impact for workers who are recalled to work at reduced levels.
Key research findings:
• In the week ending June 6th, 3.2 million claimants, or about 16.4% of the pre-crisis CA labor force, were potentially eligible to receive unemployment insurance benefits. About 3 million individuals were paid benefits during that week. Unlike more common statistics of weekly UI payment receipt, this measure counts claimants in terms of when they were unemployed, not when they were paid (which is usually several weeks later).
• Without $600/week additional benefits from FPUC, more than half of all potential eligible UI claimants would receive benefits below the Federal Poverty Level. California claimants received $1.8 billion in FPUC payments between May 31st and June 6th.
• The number of individuals receiving UI benefits is 91% of the number that report themselves unemployed in the May Current Population Survey. The percentage is likely smaller for broader measures of underemployment currently not published at the state level.
• Labor market signals from UI data are uneven. Reflecting continuing difficulties in the labor market, the number of initial UI claims has increased steadily in the past four weeks. In each of the last four weeks, initial UI claims were double the peak of weekly initial claims in the Great Recession.
• In a sign of partly improving labor market conditions, about 1 in 6 potential UI beneficiaries had their benefits denied or reduced because of earnings in the week ending June 6th. The fraction of UI claimants with some earnings was increasing rapidly in Retail Sales and Accommodation and Food Services. Only workers earning less than two-thirds of their prior weekly wages qualify for partial UI and FPUC, creating a difficult decision for workers in an uncertain labor market.
• As the economy slowly re-opens, programs such as Work Sharing, which allow working claimants to keep a share of their UI benefits and maintain eligibility for the $600 FPUC payment, would help strengthen the financial outlook for individuals who are working at reduced time and earnings.
• Over one in three California workers has filed for UI benefits since the start of the COVID-19 crisis in mid-March. The industry and demographic distribution of the last four weeks of claims has been largely unchanged and has become more evenly distributed across industries and demographic groups compared to the beginning of the crisis, confirming the recession is now affecting most sectors and individuals in the state.
Methodology
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 June 20th.
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.