Wolf Richter: Unemployment Crisis Going in Wrong Direction: Week 25 of U.S. Labor Market Collapse

Jerri-Lynn here. More analysis of the ongoing U.S. unemployment crisis, sparked as we are all well aware by the COVID-19 pandemic. I don’t think policy-makers have any idea what to do – or more accurately, what they could do that will be acceptable to their donors. Progressive economists have policy ideas, but alas there is little chance of them being adopted – that is absent much higher levels of social unrest.

By Wolf Richter, editor of Wolf Street. Originally published at Wolf Street.
Continued unemployment claims rise for second week, to 29.6 million, worst since Aug 1, meaning 18.4% of labor force is on unemployment insurance. State & federal initial claims jumped to 1.7 million in the week (not seasonally adjusted).

Total continued claims for unemployment insurance (UI) under all state and federal programs rose by 380,000, to 29.6 million people (not seasonally adjusted), the highest since August 1, according to the Department of Labor this morning. This was the second weekly increase in a row, after the 2.2-million jump last week.

These 29.6 million people who continued to claim UI under all programs translate into 18.4% of the civilian labor force of 161 million:

Blue columns – continued claims under state programs: +54k
The number of people who continued claiming UI under state programs rose by 54k to 13.2 million (not seasonally adjusted), the first increase after five decreases in a row.

Red columns – continued claims, federal & other programs: +326k
The number of people on UI under all federal programs established by the CARES Act and some other programs rose by 326k to 16.4 million (not seasonally adjusted):

  • Federal PUA claims jumped by 1.0 million to 14.59 million. The Pandemic Unemployment Assistance program, established under the CARES Act, covers contract workers, the self-employed, gig workers, etc. This was driven by a jump of 1.55 million continued claims in California.
  • Federal PEUC claims rose by 29k to 1.42 million. The Pandemic Emergency Unemployment Compensation program, established under the CARES Act, covers workers not covered by other programs.
  • State Extended Benefits jumped by 72k to 241k.
  • State STC / Workshare claims fell by 16k to 253k.
  • Federal Employees: 13.6k continued claims.
  • Newly Discharged Veterans: 13.0k continued claims.

Newly-Laid Off Workers: Sate & Federal UI Initial Claims:

Initial claims under the federal PUA program for contract workers jumped to 839k in the week ended September 5, from 748k in the prior week (not seasonally adjusted).

Initial claims under state programs rose by 20k to 857k (not seasonally adjusted) in the week ended September 5, remaining in the same range now for five weeks, and there has been no improvement:

State plus federal PUA initial claims combined jumped to 1.70 million (not seasonally adjusted). These are people who’d newly lost their work and filed for UI during the week ended September 5, translating into a monthly rate of over 7 million people who are still losing their work and file for UI.

Labor Department Corrected Calculations That Had Gone Rogue

Two weeks ago, the Labor Department announced that it would correct “seasonally adjusted” unemployment-claims calculations because they’d gone rogue during this crisis. I stopped reporting “seasonally adjusted” claims in May for that reason, and reported exclusively “not seasonally adjusted” claims, and continue to do so, and none of the data I have reported since late May was impacted by that correction in calculation methods (here is my explanation of those changes and my chart that shows just how rogue these “seasonally adjusted” claims had gone; in the linked article, scroll down to “Data Chaos, Part 2”).

The Picture That Emerges

That 1.7 million people getting newly laid off and filing for UI in the last week is a deterioration of similar terrible numbers over the four prior weeks. This means that these companies are still shedding massive numbers of people. At the same time, a smaller number of people that had received UI have gotten a job, and continued claims deteriorated further to 29.7 million claims. This is a huge number of people on UI, and it has gone in the wrong direction for the second week in a row.

There is a churn and a shift going on, with some companies and sectors hiring large numbers of people – retailers, ecommerce operations of all kinds including fulfillment and shipping, restaurants, the lodging industry, etc. – while other industries are now shedding jobs. This includes small and medium-size businesses that have received PPP loans whose effective data range has now expired.

And it includes large companies, including tech companies, where wages are higher. After having vowed during the early phases of the crisis not to do so, they’re now laying off staff. It’s a sort of sector rotation of layoffs. Read… The Second Wave of Layoffs is Here, Now Hitting Well-Paid Jobs

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  1. divadab

    I question whether this analysis double-counts the unemployed – why? Because most people who are claiming federal unemployment benefits under PUA or PEUC first have to apply for State unemployment insurance. The federal benefits are administered by the States through their unemployment programs so that federal benefits are received via the States. So included in the State totals are most of the unemployed receiving Federal benefits.

    Since the States have differing eligibility and monetary unemployment benefits the detail is complex – but since total State unemployment beneficiaries are 13.2 million and total receiving federal benefits are 16 million, the difference is mostly people who qualify for federal benefits but do not qualify for State benefits. There’s another offset in the other direction – people who qualify for State unemployment benefits (“regular” unemployment) but don;t qualify for federal benefits – but I suspect this is a low number.

    SO using the federal totals alone for total unemployed to account for the apparent double-counting gives an unemployment rate of about 10%, which is close to the official figures (16 million divided by 160 million labor force).

    I have respect for Wolf and his analysis generally – so I’m raising this question as a discussion point since for him to make such a gross error is surprising. Anyone else have any insights?

    1. divadab

      I’ve done some more research and now have posted this question on Wolf’s website and put in a call to the DOL since in their report, they total State and Federal unemployment recipients also – so if there is double-counting, it’s according to the DOL and Wolf has taken their numbers at face value.

      Just anecdotally from my local observations in the northwest, traffic volumes and the amount of people out and about suggest the 20% unemployment figure is higher than the actual. About 10% seems more like it – still a very high number denoting a huge amount of job loss and economic dislocation, but 20% is reaching depression levels.

      1. JBird4049

        Don’t forget that the unemployment levels will differ by class, region and state as well.

        The top top 20% who can relocate/shelter in place are doing fine. The middle is almost random chance. The bottom 20% living in the cities are just screwed and too often sick or dead.

        Then add that many lightly populated, or formerly emptied places, are getting a population boom of the well off and mobile employed. All this might take time to adequately show up in the stats or will hide large pockets of the newly destitute.

    2. td

      A quick answer is that much of the federal funding was directed at gig workers and others who did not qualify for state UI. There is some double-counting but not as much as you think. Wolf does answer some of this in the comments and in previous posts.

  2. LawnDart

    And yet the BLS and most major media report a rate of 8.4% (as of 9/4).

    It doesn’t take much imagination to see where we might be 6-months from now after the Fall and early Winter waves of Covid-19 swell and state and muni budgets plunge into the red.

    “Someone I loved once gave me a box full of darkness. It took me years to understand that this too, was a gift.” –Mary Oliver

    1. fresno dan

      September 12, 2020 at 8:50 am

      If you work an hour, your employed.

      Pretty much everything said by the US propaganda generating ruling class is tendentious nonsense. The boasting of the most powerful military that is unable to win a war where the enemy’s most advanced weapon’s system is a 15 year old toyota pickup truck. The richest country, the most generous country, the freest country, the greatest country – it soon becomes obvious that this boasting hides some deep insecurities. Trump is the most greatest mouthpiece for such a country. Sad. Really sad.

      1. Synoia

        Winning war? Ending the action?
        Eliminate that $pending?

        What are you a communist? /s

        Support the Rich – Their wealth will Trickle Down upon you!!!

    2. Lee

      One good gift deserves another:

      You talked but after your talking all the rest remains.
      After your talking—poets, philosophers,
      contrivers of romances—everything else,
      All the rest deduced inside the flesh
      Which lives & knows not just what is permitted.
      I am a woman held fast now in a great silence.
      Not all creatures have your need for words.
      Birds you killed, fish you tossed into your boat,
      In what words will they find rest & in what heaven?
      You received gifts from me; they were accepted.
      But you don’t understand how to think about the dead.
      The smell of winter apples, of hoarfrost, and of linen.
      There are nothing but gifts on this poor, poor Earth.


  3. Procopius

    I’ve been baffled by the numbers for several months now, but never more so than since the of August. I thought the CARES program was supposed to have expired, so how are there something like 15 MILLION people shown as “Federal PUA/Other?” How did the money not stop, thus ending their status? Am I simply misunderstanding what Mr. Reich is talking about (entirely possible).

  4. Noone from Nowheresville

    I don’t think policy-makers have any idea what to do – or more accurately, what they could do that will be acceptable to their donors.

    We keep saying that it’s not the system / game which matters but the players of the game. So does this imply that policy-makers morally know better (without being taught even – it’s innate damnitall!) but they go ahead and do the “wrong” things anyway because someone else is pulling their strings aka they have no real agency?

    If so then by replacing them we’d just get the same basic outcome anyway aka slightly different journey but same ultimate destination.

    So ultimately it’s the donors’ fault, or rather ours, because we haven’t figured out how to replace (or find the “right”) the donors. Of course, there’s also that feedback loop of the policy-makers creating donors. So in a sense it’s a perpetual motion machine until some object breaks the feedback loop.

  5. Ep3

    I expect the 3rd wave will be govt jobs.

    Now some sarcasm! “The increase in UI claims is due to these lazy ppl who want the extra $400 a week so they can make more sitting home than actually working. They could go back to work, if they wanted. In fact, they should just show up at their former employer’s closed location & start doing work. They could clean windows, mow the lawn. Then their employer will reopen & hire them back. Once these lazy Americans see that the extra $400 isn’t real, they will blame all these democrat governors who bankrupted their states by being elected to fix all the problems made by previous administrations run by some other party, we won’t mention their name and democrats won’t mention them either.”

    As a side, after suffering immensely from the 2008 depression, Michigan elected a republican governor (with a republican legislator). His claim to fame was his successful management of Gateway computers, so his business acumen was going to translate to government. He immediately enacted a >$1 billion tax cut for businesses (and shifted tax burden onto future retirees). But hey, a bankrupt state budget can afford such things right! But this goes back even further. In the 1990s, Michiganders were upset that their schools needed funding, which was covered by property taxes (actually what you have is 2 states consolidated as one; one half is rural & white spread across 2/3rds of the state. While the rest of the population is concentrated in a geographic corner of the state, heavily populated with minorities. Property taxes were being taken from the White north & used to educate minorities elsewhere). So the governor said ‘let’s cut property taxes & raise the sales tax so that when the economy tanks, the schools (& govt) suffer even worse’ (he didn’t say all that). What we have now is each school district can now raise funding on its own. Before you paid taxes to your district thru your property taxes. Well now you pay sales taxes & far less property taxes. And since you and your neighbors had a 40% property tax cut in exchange for a 2% sales tax increase (its a 67% increase, from 4 to 6) you can now afford to cut your sales purchases in exchange for a new school bond increase for a new fancy Olympic size swimming pool. Real quick some math. My property tax cut was $1800. I would need to spend $90,000 a year just to make up for that lost revenue. (I don’t know the amount of the cut, I just know that’s how much I save each year from the headly amendment).
    I bring this up because during this current economic collapse, property taxes have held steady, while sales & income taxes have collapsed. This is why California is suffering. The revenue bases of state & local govts have been set up to go off like bombs with delayed timers on them.

  6. Waking Up

    It seems that we seriously need a Federal Government Jobs program like the Civilian Conservation Corp. Private industry won’t or can’t provide the solution on a mass scale because their primary goal has become profits. Mass consolidation and monopolies in the private sector is just exacerbating economic inequality and definitely NOT the solution.

    I also can’t help but think about the millions of people who have entered the labor force for the first time, can’t find employment, yet aren’t qualified for unemployment benefits because they don’t have a work history. Even considering how difficult this is for them in the present, what will be the long term ramifications on their psychological well being and job prospects? Couldn’t we as a country have a national jobs program which takes into account a pandemic (providing proper PPE for all workers), yet provides jobs and finally considers doing something about our infrastructure problems which are an issue in all of the states? This jobs program could also bring home military personnel to do something productive and positive when they return and possibly curtail some of the suicides. It’s obvious the current political class lacks the will to do the right thing. The people will have to demand it!

    1. sharonsj

      Why else do you think suicide rates are up and drug use is rampant? The middle and lower classes have been screwed for decades. Wages are stagnant but productivity is through the roof. There are few decent jobs and better jobs require college degrees that mean going into debt for the rest of your life. And since the government won’t do much except give themselves and their rich friends most of the money, the genuinely small businesses got nothing and won’t survive the pandemic closures. Next to fall are the broke cities and the broke states. If you think the protests and rioting are bad now, wait for the 20 million evictees to join in.

  7. Noone from Nowheresville

    Speaking of a starting point policy discussion: So does anyone remember that during the Obama administration that unemployment benefits were extended to 99 weeks. I believe there was also a healthcare subsidy (70% ish I think) for COBRA.

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