Scant relief as jobless claims ‘keep coming’

A reopened economy? Not for the 2.1 million Americans who filed new unemployment claims last week.

Restrictions on economic activity eased in some parts of the country, and the stock market rallied this week on the prospect of more global stimulus packages. But even with harbingers of relief ahead, the economic consequences of the pandemic for working Americans continued to unfold. The number of continued claims — those from people remaining on unemployment — dropped modestly as people in some parts of the country returned to work.

The number of new claims, while continuing to decline weekly since peaking at 6.6 million in late March, is still at historic highs. New joblessness reported by the U.S. Department of Labor for the week ended May 23 brought the 10week total to 40.7 million.

“The size of the shock in the

labor market is really breathtaking,” said Scott Anderson, chief economist for Bank of the West. “Even though it’s been dropping since the peak, the drop has been slower than we thought. Claims just keep coming.”

Some of these jobs were lost a while ago, but the claims are only now being reported due to backlogs at state unemployment offices. But the numbers also show the hit to employment across sectors: Retail, trade, leisure and hospitality virtually ground to a halt under strict shelterinplace orders.

“It’s not a good sign that we continue to see such elevated numbers,” said Michael Farren, a research fellow at George Mason University specializing in labor issues. “It suggests that we are not through the business shutdowns and perhaps even permanent business closures. Some temporary furloughs may be shifting over to permanent layoffs as businesses that were trying to remain afloat now say this is going on too long.”

Like many economists, Farren thinks the numbers understate the magnitude of joblessness. He noted that the statistics omit about 8 million people who are not actively seeking work because they must watch children out of school or for other virusrelated reasons.

“These numbers are so bad that they really defy explanation,” said Chris Rupkey, chief financial economist at MUFG Union Bank, a subsidiary of the Japanese financial group. Rupkey said even if the unemployment rate, which likely stands at 25% or more, drops significantly by the end of the year because of companies reopening, the country would be fortunate to see only 1 in 10 Americans out of work.

“Over a decade ago during the 2007 to 2009 recession, unemployment got to 10%,” Rupkey said. “This time our first stop back would be 10%,” he added. “No one could have ever imagined this happening.”

In California, 212,343 new claims were filed last week, bringing the 10week total to 4.7 million.

The state Employment Development Department said Thursday that it had processed 5.4 million claims and paid more than $18.8 billion to unemployed workers from the beginning of the pandemic to May 23.

For the week ended May 23, it said 110,155 people filed claims for Pandemic Unemployment Assistance, a new category created by Congress for freelancers, gig workers and selfemployed people. Along with previous claims, that brings the total close to 800,000.

The EDD is hiring 1,800 additional staff, paid for by federal funds, to handle the flood of claims. That’s on top of 1,200 regular EDD staff, 1,300 government workers who were redirected to EDD, and 500 temps.

For many unemployed workers, the extra $600 a week Congress included in pandemic relief is all that’s keeping them afloat. It expires July 31.

Workers getting that money would be wise to start looking for work now, as the job market will likely become much more competitive once those benefits dry up and the labor market is flooded with job seekers, according to Julia Pollak, a labor economist at ZipRecruiter.

“The tables will be turned against job seekers very soon with a massive influx” into the market, Pollack said. She expects that available jobs will likely see huge numbers of applications.

“If you wait to start looking until the last week of July, you could be in for a very rude awakening,” she said. “It’s going to be harder to get those jobs than to get into Harvard.”

For Sonia Bautista and William Gonzalez, returning to work is both tantalizing and worrisome. The married couple were both let go in early March from service jobs in the hotel industry and now are sheltering at their South San Francisco apartment. Their son, Ricardo, just turned 15 and had a driveby graduation from middle school Wednesday.

Bautista, a housekeeper at Marriott’s Palace Hotel in San Francisco, choked up as she discussed the pride she takes in her work.

“It’s not fair because our company does not take care of us,” she said. “I get depressed because I don’t know what’s going on.”

She and Gonzalez, who works in the employee cafeteria at the SFO Marriott Waterfront in Burlingame, worry because the hotels haven’t reached out to them. They wonder whether workers who return will have their temperatures taken and what kind of protective equipment they’ll receive.

Marriott did not answer a request for comment.

“The end of the quarantine is a serious question,” Gonzalez said. “It is likely many people will get sick when we go back to work. Nobody’s been tested.”

Bautista takes public transit to San Francisco, another concern.

On the other hand, Gonzalez said, “We want to go to work tomorrow.”

They don’t know if hotels will have enough occupancy to bring back many workers. Bautista has six years of seniority, but Gonzalez is low on the seniority list.

For now, their unemployment benefits are sustaining them, but without the extra weekly $600, they said, they will rack up credit card debt. They pay $2,800 a month in rent.

Health care is another concern as their coverage from a fund run jointly by their employers and their union, Unite Here Local 2, will end in July. Gonzalez has high blood pressure, is prediabetic and has sleep apnea.

Besides the number of new claims, another economic measure is the number of continuing claims from people receiving benefits who have not been rehired or found new work.

Some 21.1 million people continued their existing unemployment claims for the week ended May 16 (renewals lag new claims by a week), representing 14.5% of the workforce. (Those figures are seasonally adjusted by the Labor Department.)

That compares to a record high 24.9 million for the week ended May 9, or 17.1% of the workforce.

A year ago, continued unemployment claims totaled just 1.7 million, or 1.2% of the workforce.

Some economists believe that continued claims will fall as businesses reopen but that unemployment rolls will remain bloated even when hiring picks up speed.

“It could be two or three months of steady continuing claims even after hiring picks up,” said Pollak, the labor economist at ZipRecruiter. “That’s just because there were so many people laid off each week.”

“Surveys indicate a lot of people think unemployment is temporary, with 78% saying they’ll be able to go back to their old jobs,” Anderson said. “We have a lot of skepticism about whether that’s actually going to be the case or not. The longer the shutdowns drag on, the more businesses will have to fold or make job cuts more permanent.”

A recent study of the coronavirus’ impact on the U.S. economy by Stanford Economist Nicholas Bloom found that 42% of layoffs during the pandemic will result in workers permanently losing their jobs.

The speed of the downturn continues to stun experts.

“The economy is like a battleship; hard to turn on a dime,” Farren said. “But I suppose you can sink it pretty quickly.”