Unsanitized: Disaster on the Horizon for the Long-Term Unemployed

Potentially tens of millions of workers will lose all unemployment benefits by December. This is The COVID-19 Daily Report for September 24, 2020.

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First Response

When I started to brainstorm the various scenarios that would make this winter one of the most challenging in American history, I included things like Donald Trump attacking the legitimacy of the election and openly trying to steal it. I included things like a politically rushed vaccine announcement. I initially included the possibility of a Supreme Court vacancy, then pulled it out because it was a bit more speculative and I didn’t have enough space, which kind of tells you how many things might go wrong between the election and the inauguration. (By the way, just about everything in that buzzy Atlantic article—no link, go find it on your own—was in my story.)

What I didn’t include, but should have, was the virtual certainty that, come December, we’re going to have millions of Americans who earlier this year were in the workforce now saddled with no visible means of support. Not just the lack of any federal boost for unemployment, as that expired two months ago. I mean nothing.

Unemployment reporting from the Labor Department begins to tell this story today. As you may know, this report has shown first-time jobless claims over the highest number recorded during the Great Recession in every week since March 26. First-time claims went up this week, to a seasonally-adjusted 870,000, with another 630,000 on Pandemic Unemployment Assistance (PUA), which is for workers not normally covered by unemployment insurance, like gig employees and freelancers. About 12.3 million workers are continuing on regular state benefits, and another 11.5 million on PUA.

There’s been some concern that these numbers have been over-counted, with fraudulent claims for benefits and double-counting of retroactive claims distorting the picture. Indeed, California literally shut down its unemployment insurance system recently to scour for fake claims. This mostly affects PUA. But there was a separate report today showing that close to 1 million unemployment claimants exhausted their six months of state benefits in August.

Most states (but not all!) allow 26 weeks of benefits before cutting people off. The CARES Act included Pandemic Emergency Unemployment Compensation (PEUC), which allows 13 additional weeks of benefits. As far as we know, 1.6 million workers have filed for PEUC, by the week ending September 5. These are the long-term unemployed. Their industries may remain shuttered or battered by being consumer-facing; they have struggled to find new work in a tough job market. And around the beginning of Demember, if these people haven’t found a new job, they will exhaust PEUC.

Read all of our Unsanitized reports

Now, there’s actually another lifeline after PEUC, called Extended Benefits (EB). This has a bit of an unwieldy application program and an uncertain payout of between six and twenty weeks, depending on the state. Some 241,000 workers, who might have been out of work before the pandemic and then found it impossible to get a job after, are already on EB. Those on PUA are not eligible for extended benefits through PEUC or EB; theirs is a flat 39-week program.

Long-term unemployed who filed their initial claim between July and September of last year will see EB expire next month. And more will see that run out in subsequent months. But there’s an added wrinkle here. PUA and PEUC are only authorized until the end of the year. After December 31, the 11.5 million on PUA will lost it, as will the millions who are on or coming onto PEUC. Extended benefits might still be available for those who exhaust their state system, but millions won’t have this opportunity.

“If Congress fails to provide additional weeks of benefits,” Chad Stone and Sharon Parrott write for the Center on Budget and Policy Priorities, “a growing number of workers — which likely will reach into the millions by early next year — will exhaust their benefits and be left with no basic income support to replace their lost wages.”

It hardly matters, given this horror, but the Trump executive order for “Lost Wages Assistance,” that offered a $300 federal benefit to too-small unemployment checks, has already run out in 22 states, and will run out nationwide shortly.

But that’s almost a side issue and is certainly a sideshow. All unemployment benefits for a lot of people are going to run out in December. It’s hard to estimate just how many, because there are so many variables: how many weeks of unemployment and extended benefits your state offers, the timing of PEUC and PUA expiring, whether those currently on those programs can find work. But it could be well over 10 million.

These people will have no backstop on wages, no support from the government. The defaults on rent payments, which have increased but not skyrocketed so far, will climb. The need for food assistance will climb. The lack of money for basic needs will push down consumer spending and start to feed on itself, hampering the recovery. Congress can of course make sure that PUA and PEUC don’t expire, ensuring more of a lifeline for people. But virtually nobody has suggested such an option.

This is what we’re looking at, and we’ve been sleepwalking through it. The $600 boost for four months gave people a cushion, but that’s long gone. In December, people are going to start to lose their benefits entirely, in the middle of a pandemic, a likely chaotic post-election cycle, and a Congress that has completely neglected them since March. The plight of the long-term unemployed is one of the biggest danger points we face on the economic side of this crisis. We know it’s coming, and we can prevent it. We’re just not acting like it.

Days Without a Bailout Oversight Chair

182.

Today I Learned

  • Off topic but I’m briefly quoted in this story about the focus on personnel in a Biden administration. By the way we don’t wait to be “fed” information; we do our own reporting. (Politico)
  • Mike Parson, the governor of Missouri, has coronavirus, and is up for re-election. (St. Louis Post-Dispatch)
  • Retailers have decided to pay rent again, though landlord fights continue. (CNBC)
  • “Human challenge trials,” where people willingly get exposed to coronavirus to see if a vaccine works, have kicked off in Britain. (Financial Times)
  • Mike Pence defends holding large indoor rallies in close quarters without masking, which is like defending throwing people off a bridge. (ABC News)
  • A type of insurance on world trade has been curtailed because of the pandemic, which is snarling global supply chains. (Wall Street Journal)
  • The impact of the virus on school segregation. (Politico)
  • Coronavirus sniffing dogs deployed at the Helsinki airport. (CNBC)

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