Layoffs still high, but data in question

WASHINGTON — The number of Americans seeking unemployment benefits dipped last week to a still-high 840,000, evidence that layoffs remain elevated seven months into the pandemic recession.

Yet economists say they are increasingly dubious about the unemployment claims figures, even though there is little doubt that hiring has slowed and employers have continued to lay off workers.

One reason layoffs remain high is that companies often hold on to workers when a recession begins, if they can, in hopes of outlasting the downturn.

Yet if the recession drags on, many will eventually give up and cut jobs.

“Some of these new layoffs are coming from firms that didn’t want or didn’t have to lay people off at first,” said Constance Hunter, chief economist at KPMG.

Now, “they have no choice but to start reducing their workforce,” she said.

At face value, the Labor Department’s report Thursday indicated that more than 800,000 people are still being laid off each week, a historically huge number — more than in any week during the 2008-09 Great Recession. Weekly applications for unemployment benefits have long been considered a proxy for job cuts.

But the flood of layoffs during the pandemic recession and the creation of some new jobless-aid programs have overwhelmed state unemployment agencies. A result is that the jobless claims figures the government has been reporting have become an object of skepticism.

“We can’t view it as real-time job separation data,” said Elizabeth Pancotti, a policy adviser at Employ America, a left-leaning advocacy group, referring to layoffs. “We’re still seeing massive overcounting of initial claims.”

Some states are still processing backlogged applications from this summer, Pancotti said. California, for example, stopped accepting new claims for two weeks so it could clear a backlog of 600,000 applications that are more than three weeks old.

In many states, the data for initial jobless claims also includes workers who had been laid off previously, then found temporary work or were recalled temporarily — only to lose their jobs again and reapply for unemployment benefits.

These repeat applicants account for roughly half of jobless claims in California, according to the California Policy Lab.