Unemployed prepare for big cut in benefits
Expanded funds to disappear as jobless claims rise
An additional 1.4 million Americans filed for unemployment last week, just as the benefits they can receive are about to be slashed, deepening the humanitarian and economic crises stemming from the pandemic.
In an ominous sign, it was the first time the weekly jobless claims rose since the initial onslaught of layoffs peaked in late March. Economists said the increase of about 109,000 claims could include some people who had returned to work in June only to be laid off again during new shutdowns.
The continued flow of job losses, which now total 52.7 million since the start of shelterinplace orders, highlight how much economic turmoil has been wrought.
All told, 31.8 million people were collecting unemployment benefits for the week ended
July 4, according to the U.S. Department of Labor’s nonseasonally adjusted data. (That figure cannot be compared to historical data because it includes freelancers and the selfemployed, who were not previously counted.)
“We’ve gotten inured to levels of unemployment and furloughs we’ve never seen before in the U.S., that were unimaginable before the pandemic,” said Andrew Stettner, senior fellow at the Century Foundation, a progressive think tank.
Besides regular layoffs, 974,799 freelancers, gig workers and selfemployed people applied for Pandemic Unemployment Assistance, a new program created for those excluded from traditional unemployment payments.
California processed 292,673 new unemployment claims for the week, a slight increase from the previous week. It also handled 163,525 claims for Pandemic Unemployment Assistance. The state has paid about $50 billion in unemployment benefits since midMarch. Last week it paid $4.1 billion in benefits. That was almost eight times more than the $542 million it sent out in its single highest week in the aftermath of the 200709 recession, in February 2010.
The herkyjerky reopenings and then closings of businesses exacerbate the situation.
“It creates an incredible amount of uncertainty not knowing what is going to happen next,” said Rob Fairlie, an economics professor at UC Santa Cruz. “Uncertainty is bad for the stock market and for consumer confidence, which is a leading indicator of the economy. At some point, people will stop buying stuff and really cut back on their expenditures. That could put us into a really deep recession.”
Continuing unemployment claims fell to 16.2 million for the week ended July 11, a drop of 6% from the previous week. California had 2.7 million continuing claims, down 217,526 from a week earlier. Continued claims for selfemployed people totaled 13.2 million nationally and 2.3 million in California. Continuing unemployment data lag new claims by a week or more.
“I think the unemployment rate will be stubborn,” Fairlie said. “I don’t think we’ll see a huge or quick movement back to work. It’s to be a rocky road.”
Fairlie’s research suggests the impact was particularly devastating to minorities, with an unemployment rate of 31.8% for Black people and 31.4% for Latinos, he said.
Minorities also tend to have smaller savings, and will feel even more devastation from losing the extra benefits that are about to expire, he said.
Congress had allocated an extra $600 a week for unemployment benefits to cushion the impact of the pandemic and shelterinplace orders. That extra money ends nationally by July 31 and Sunday in California. Washington is stalemated about whether to abandon it, continue it or offer it at a lower level.
The latter is the most likely option, but because of antiquated state systems, it could take several weeks for jobless people to receive whatever the replacement benefit is. California’s Employment Development Department did not respond to questions about how long it would take to implement any additional payments once Congress decides.
“Regular unemployment benefits are pretty miserly,” said Chad Stone, chief economist at the leftleaning Center on Budget and Policy Priorities, a public policy organization. “We’re now going from generous (with the $600) to penurious.”
California unemployment benefits without the addition top out at $450 a week.
Losing the $600 “is like being catapulted into the Grand Canyon,” said Ann Wees of Oakland, who was laid off from a job as a receptionist at a day spa. She and her husband, who was laid off from a retail job, each receive about $300 a week in regular unemployment, so their income will plunge by twothirds without the extra money. “That goes away and we are in big trouble. It will mean less healthy choices” for food.
The couple plan to grow some produce and swap crops with neighbors.
They are handling some shopping and cooking for their elderly landlords, who live upstairs and have agreed to forgive their rent until things improve.
“I feel very blessed about that; it’s so rare,” Wees said, choking up. “If that weren’t the case, we’d probably be packing up” to move.
Wees has a parttime acupuncture practice, which is now allowed to operate because it is in the medical field. She sees just two or three patients a month, focusing on those who are in the most need, such as people with addiction problems, mental illness or chronic pain. Her practice incurs some big expenses such as malpractice insurance and the annual license.
Economists said the $600 not only acted as a lifeline for lowerincome people but also has helped to buoy the economy.
“Not only did it allow people to pay their bills and meet household expenses when not working, but it also injected money into the economy that kept things from being even worse,” Stone said. “That $600 was an important contribution to maintaining consumption of goods and services.”
The argument that it keeps people from going back to work doesn’t stand up to the fact that there isn’t any work to go back to, Stone said.
“When jobs are scarce, unemployment should last longer and be more generous,” he said. “I don’t think there’s any doubt that jobs are scarce now.”