Why are so many people in California still seeking unemployment benefits?
SACRAMENTO — Why are so many people in California still not working?
The state has roughly one-fifth of the nation’s new unemployment claims week after week — when it has about 11% of the country’s workers.
Two quick reasons: Businesses such as restaurants in the tourist-dependent state are more cautious about hiring, and thousands of Californians are quitting their jobs and reluctant to work in lower-paying positions.
A bigger trend may also be emerging.
Major forces are affecting how people hire and look to work, said Michael Shires, associate professor of public policy at Pepperdine University: “California’s labor market is broken, and COVID has changed the rules.”
The numbers say that in the week ending April 23, the latest data available, California reported an estimated 44,217 initial unemployment claims, or about 22% of the nation’s claims. The previous week, California had about 24% of the country’s claims. Those percentages have been consistent for months. The numbers are not seasonally adjusted.
The economic picture is not all bleak. While California’s March unemployment rate of 4.9% remained one of the nation’s highest, and well above the national rate of 3.6%, it’s dropped sharply since the depths of the COVID-triggered recession of two years ago.
“You’re seeing ‘help wanted signs’ everywhere,” said Christopher Thornberg, director of the UC Riverside School of Business Center for Economic Forecasting and Development.
The unemployment numbers, he said, are probably inflated by fraud. The state’s program was plagued with widespread fraud in 2020 and 2021, but the Employment Development Department, which manages the unemployment insurance program, has taken strong steps to curb abuse.
“High claims reflect both economic and cultural forces in California,” said Michael Bernick, former state Employment Development Department director and.now an employment attorney at Duane Morris LLP. “A significant segment of the California workforce remains on the sideline.”
He listed some of the jobs not being filled often enough: Staff in group homes for the disabled, nurse assistants in longterm care facilities, truck drivers, electricians and other building trades craft persons.
The state’s high cost of living is one reason claims continue. Huge expenses likely mean that “when people become unemployed they are less likely to have enough savings to make ends meet, resulting in them signing up for unemployment benefits at higher rates,” said Chris Hoene, executive director of the nonpartisan California Budget and Policy Center.
He gave another reason for the claims: California’s leisure and hospitality sector, hurt badly during the pandemic as people all but stopped vacation travel and cut back on entertainment because of the shutdown, is recovering quickly but still has not gained back all of its preCOVID jobs.
In March, it had 1.85 million jobs, up a healthy 410,000 from a year earlier. But that was still below the 2.05 million jobs of February 2020, the month before the pandemic began.
Workers are also leaving jobs in big numbers. In February, 491,000 workers in California voluntarily quit their jobs, up from 467,000 the previous month and 320,000 a year earlier. People who retired or were transferred elsewhere are not counted.
Workers who voluntarily leave their jobs are not supposed to be eligible for unemployment, though some do receive it..
The state had 398,638 unemployment benefit recipients in the March week used to calculate unemployment data, down from 680,279 a year earlier.
Reluctant California businesses Robert Lapsley, president of the California Business Roundtable, cited cautious workers and businesses as reasons for the slower recovery.
“Because of the economic benefits they received there was a whole sector of workers, particularly in service industries and tourism who didn’t want to come back. Now they’re slowly coming back while employers are trying to figure out how many they bring back at a time,” he said.
Companies see a long list of variables:: Will there be a new surge of COVID-19 cases? What will higher interest rates mean? Will water restrictions become widespread? Will other states continue to lure companies with lower taxes and fewer regulations?
Many businesses feel “it’s better to slowly recover what we have and wait and see,” Lapsley said.
A study last month by the nonpartisan California Policy Lab found that “the changes in domestic migration we’ve seen since the pandemic began appear to be slowing and perhaps even reversing” as the economy stabilizes.
Lapsley urged caution in predicting the future. “Everything is a waitand-see mode right now,” he said.