Background: The COVID-19 crisis has led to historically unprecedented increases in the level of initial Unemployment Insurance (UI) claims filed in California since the start of the crisis in mid-March. Through a partnership with the Labor Market Information Division of the California Employment Development Department, the California Policy Lab is analyzing daily initial UI claims to provide an in-depth and near real-time look at how the COVID-19 crisis is impacting various industries, regions, counties, and types of workers throughout California.
The Policy Briefs are updated on a monthly basis.
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November 19th Policy Brief
By Alex Bell, Thomas J. Hedin, Geoffrey Schnorr and Till von Wachter
TECHNICAL APPENDIX: Exhaustion Methodology
Key Research Findings
1. An estimated 750,000 Californians will abruptly run out of UI benefits at the end of December unless additional legislation is passed to extend emergency programs past Christmas. Pandemic Unemployment Insurance (PUA) is set to expire on December 26th, which we project will result in a sudden stop of benefits to more than a half-million PUA claimants still likely to be unemployed if current conditions persist. Also at year’s end, nearly 170,000 regular UI claimants will abruptly lose benefits as the federal emergency extension for regular (Pandemic Emergency Unemployment Compensation, PEUC) UI expires. The expiration of these two programs will result in $173 million fewer federal dollars coming into California every week ($692 million a month) starting in January 2021.
2. A second wave of exhaustions, cresting in May 2021: An additional 390,000 regular UI claimants are projected to stop receiving their benefits by May 2021, as workers who were laid off in March begin to exhaust their benefit extensions. This number will grow over the course of the summer. If current conditions persist between now and May, projections indicate nearly one-fifth of current regular claimants are likely to have exhausted benefits prior to finding work.
3. The projected number of exhaustions is dependent upon the number of people who return to work (and exit UI) prior to their exhaustion date: if the economy improves (and more claimants exit), then fewer will exhaust, but if the economy worsens, and more claimants exit, then exhaustions will rise.
4. The number of workers currently receiving unemployment benefits remains alarmingly high. Over 3.3 million claimants, or 17% of the state’s labor force in February, were paid benefits for unemployment experienced in the week ending October 17th. Since the start of the COVID-19 crisis in mid-March, 8.6 million unique California claimants, or 44% of the California workforce, have filed for UI benefits.
5. New initial claims plummeted following EDD’s freeze on accepting new claims from September 20th through October 4th. The decline was particularly pronounced among Pandemic Unemployment Assistance (PUA) claimants. PUA claims accounted for nearly two-thirds of initial claims in September, but only 15% of new claims filed in the last week of October. Additional claims now make up 80% of initial claims, and additional claims are still higher than initial claims in the worse week of the Great Recession. This suggest a high amount of churn in the UI system.