Are 20 million Americans really getting unemployment benefits? Don’t take it at face value

Are 20 million Americans really getting unemployment benefits? Don’t take it at face value

Are 20 million Americans collecting unemployment benefits? Is is 16 million? Is it a much lower figure? The truth is, no one knows exactly.

An extraordinary flood of jobless workers applying for benefits during the coronavirus pandemic is still overwhelming state labor offices and making it hard to get a good read on how many people are really out of work. Complicating matters was the recent lapse and then renewal in emergency federal benefits for the unemployed.

See: A visual look at how an unfair pandemic has reshaped work and home

The inability of the states and federal government to pin down the true level of unemployment is no small matter. For one thing, it makes it difficult to figure out how many people actually need money and how much should be spent to help them.

Fuzzy government math also obscures how quickly the economy is recovering. Lawmakers in Washington need to know to determine how much additional federal aid is needed to shore up the economy. If they overspend, some economists contend, it could raise problems down the road.

Read: Rising inflation is no threat to the U.S. economy – or is it?

The latest government reports on jobless claims underscore the confusion.

The Labor Department on Thursday said total continuing jobless benefit claims — a proxy for how many people are getting benefits — rose sharply to 20.4 million as of Jan. 23. Those are the latest figures available.

Just a few weeks earlier, however, the government put the figure at a pandemic low of 16 million.

What explains the 4 million-plus gap in the same month?

The answer is mainly a new federal law approved at the end of December that raised unemployment compensation by up to $300 a week and made jobless workers eligible for benefits over a longer period of time.

The new law was only passed after the prior one briefly lapsed. The result was a decline in continuing jobless claims in early January and a sharp increase by the end of the month.

How come? Lots of people whose benefits had expired in December reapplied, lured in part by more generous compensation that in many cases provides more money than their old jobs.

Yet that doesn’t explain the entire increase. A government watchdog agency found that fraud and double counting plague aid programs. More generous benefits and relaxed eligibility standards have spawned a sharp increase in fraudulent claims, for example.

“We are fighting an unprecedented and sustained attack from bad actors who are attempting to file fraudulent unemployment claims,” the Kansas Department of Labor told a local TV station in a statement. “It cannot be overstated how significant of a challenge fraudsters have made paying legitimate claims.” 

Read: Jobless claims inflated, GAO finds

Also: Why the inaccurate jobless claims report is still useful to investors

The problems aren’t likely to go away soon. Many state labor offices are in the midst of updating antiquated technology systems and they have added more employees, but they still face a large backlog of jobless claims. Sometimes that leads to big increases or declines from one week to next depending on how successful they are at reducing backlogs.

Take Ohio. The state reported almost 138,000 new claims in the first week of February, compared to just 48,000 in the prior week. Did 100,00 Ohioans really apply for jobless benefits last week? Probably not.

“I suspect that these gyrations in individual states reflect the varying speeds — some really slow and others glacial — at which state labor offices updated their systems after Congress extended special benefits in late December,” chief economist Stephen Stanley of Amherst Pierpone Securities wrote.

Stanley has been one of the most prominent critics of the accuracy of the claims report as far back as last June. He and other economists say it’s best to pay attention to whether the trend in new claims is up or down and not take the actual numbers at face value.

Ditto for the total number of people who are unemployed and getting benefits. The numbers appear to be inflated.

A separate monthly U.S. jobs report produced by the Labor Department estimates 10.1 million people were unemployed in January — just half the number of those supposedly getting benefits.

That number is probably too low since it doesn’t take into account some 4 million people who’ve dropped out of the labor force during the pandemic. Yet it suggests unemployment, while bad, is not nearly as bad as the jobless claims report shows.

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