Jobs are coming back. Companies are reopening. But a year after the pandemic shook the economy, claims for unemployment insurance remain stubbornly, shockingly high – higher weekly than at any point in any previous recession, according to some measures.
And progress has stalled: initial weekly claims under the combined regular and emergency programs have stagnated at just over a million since last fall, and last week was no exception, the Department of Labor reported on Thursday.
“It goes up a bit, it goes down, but we really haven’t seen much progress,” said AnnElizabeth Konkel, economist at the career site Indeed. “A year after that, I’m starting to ask myself: what will it take to fix the magnitude problem? How is this really going to end? “
The continuing high rate of unemployment claims has been a mystery to many economists. With the pandemic still suppressing activity in many sectors, it makes sense for unemployment to remain high. But companies are reopening in much of the country, and employment and spending trends are generally improving. So shouldn’t unemployment records be falling?
New evidence from California may offer a partial explanation: according to a report released Thursday by the California Policy Lab, a research organization affiliated with the University of California, nearly 80 percent of unemployment claims filed in the state last month were from people who had it was discharged at the start of the pandemic, went back to work and was discharged again.
These repeated claims were particularly common in the information sector – which in California includes many film and television workers who were marginalized by the pandemic – and in the hard-hit hotel and restaurant industries, as well as in construction.
Policy Lab researchers had access to detailed state information that allowed them to track individual workers through the system, which was not possible with federal data.
California’s economy differs from the rest of the country in a myriad of ways, and the pandemic played out differently there than in many other places. But if the same patterns hold elsewhere, it suggests that the pandemic’s ups and downs – blockages and reopenings, restrictions that increase and decrease as virus cases increase and decrease – have left many workers trapped in a kind of limbo .
A restaurant can call back some workers when internal meals are allowed, only to fire them again a few weeks later, when restrictions are reimposed. A worker can find a temporary job in a warehouse or get a few hours of work in a delivery app, but he will not be able to find a more stable job.
“It shows the oscillation of employees, unemployed, employed, unemployed – people returning to the system,” said Elizabeth Pancotti, director of policies for Employ America, a group in Washington that has been defending the unemployed. “We didn’t see that in previous recessions.”
What this instability will mean for workers’ long-term prospects remains unclear. Economic research has found that long periods of unemployment can leave workers at a permanent disadvantage in the labor market. But there are few precedents for such a prolonged period of instability.
“We don’t know what happens if you are out of work for two months, you go back to work for two months, you are out of work for two months, you go back and forth,” said Pancotti. .
California data shows how the economic effects of the pandemic were concentrated in certain industries and demographic groups – and how the consequences continue to increase for the most affected workers, even as the crisis eases for many others.
Nearly 90 percent of black workers in the state claimed unemployment benefits at some point in the pandemic, according to the Policy Lab’s analysis, compared with about 40 percent of whites. Younger and less educated workers were hit particularly hard.
These totals include records from the federal Pandemic Unemployment Assistance program, which covers people left outside the regular unemployment system, a group that disproportionately includes black workers. The record keeping of this program has been hampered by excessive accounts and fraudulent claims. But even a look at the state’s regular unemployment insurance program, which has not faced the same problems, reveals remarkable numbers: close to three out of ten California workers claimed benefits during the crisis, and more than four out of ten black workers.
“This degree of inequality is mind-boggling,” said Till von Wachter of the University of California, Los Angeles, one of the report’s authors.
Many of those who lost their jobs at the beginning of the crisis went back to work. But millions do not. The Policy Lab found that nearly four million Californians received more than 26 weeks of benefits during the pandemic, a rough measure of long-term unemployment.
“We have solidly moved to a world where a large-scale long-term unemployment problem is now a reality,” said Dr. von Wachter. Black workers, older workers, women and those with less education are more likely to be unemployed for long periods.
Nationally, nearly six million people were enrolled by the end of February in federal extended benefit programs that cover people who have exhausted their regular benefits, which last six months in most states. The aid package signed by President Biden last week ensures that these programs will continue through the fall, but the benefits alone will not prevent the damage that prolonged unemployment can do to workers’ careers and physical and mental health.
“The recovery needs to be on the scale of a single economic recovery in a generation to really bring these people back into the job market,” said Konkel.
The most recent data provide little sign that this is happening. More than 746,000 people filed for unemployment benefits for the first time last week, up 24,000 from the previous week, according to the Department of Labor. In addition, 282,000 filed for Pandemic Unemployment Assistance.
Most analysts expect the labor market to accelerate in the coming months, as warmer weather and rising vaccination rates allow more companies to reopen and the new injection of government aid encourages Americans to go out and spend. Federal Reserve lawmakers said on Wednesday that they expected the unemployment rate to drop to 4.5 percent by the end of the year, a significant increase from the 5 percent predicted three months ago.
“We are already starting to see improvements now, and I think it will start to accelerate quickly,” said Daniel Zhao, economist at the career website Glassdoor.
But government aid can do so only as long as the pandemic continues to limit consumer behavior. The pace of recovery now, Zhao said, depends on a factor beyond the scope of normal economic analysis.
“The dominant factor now is how quickly we can put vaccines on the guns,” he said.