U.S. layoffs still high, but so is skepticism
The number of Americans seeking unemployment benefits dipped last week to a still-high 840,000.
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.
Disney said last week that it would cut 28,000 jobs. And American Airlines and United Airlines combined furloughed 32,000 employees last week. Airlines had been barred from cutting jobs as long as they were receiving federal aid, which expired this month. The American Hotel & Lodging Association has said that nearly three-quarters of hotels say they’ll have to lay off more workers without further financial aid.
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.”
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 2008-2009 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 joblessaid 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 noted. 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.
Till von Wachter, an economist at UCLA and director of the Policy Lab, said that initial applications can also include workers who have used up their 26 weeks of state unemployment and are transitioning to an extended benefits program that provides three additional months of payments.
And this spring, Congress created a new program, Pandemic Unemployment Assistance, or PUA, that made selfemployed and gig workers eligible for unemployment aid for the first time. Yet in many states, to
qualify for the PUA program, the unemployed must first apply for regular jobless benefits. Only after they have been rejected under that system can they apply for PUA.
Last week, more than 464,000 people applied for aid through PUA. These figures aren’t adjusted for seasonal trends, so the government reports them separately from the traditional jobless claims. Yet the figure may include some people who applied under the traditional benefits program.
Organized fraud has also been a problem, particularly in the PUA program, in which it’s difficult for states to verify applicants’ incomes. Contractors and gig workers, for example, rarely have W-2 tax forms, which employees in traditional jobs receive.