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‘A meaningful hit to the economy’: What could happen if Congress cuts unemployment benefits

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White House economic advisers and GOP lawmakers including Senate Majority Leader Mitch McConnell contend the extra payment acts as a disincentive for workers to seek new jobs.

More than 30 million people are receiving unemployment benefits and new applications for jobless aid have started to rise again. But Republicans want to reduce a $600 enhanced unemployment benefit in the next coronavirus relief package, a proposal that could leave families with billions of dollars less to spend to bolster the economy.

White House economic advisers and GOP lawmakers including Senate Majority Leader Mitch McConnell contend the extra payment acts as a disincentive for workers to seek new jobs, because some people are receiving more money in benefits than they would earn working. Democrats and many economists say there are no jobs for those people right now anyway, and the payments are essential for keeping the economy afloat — and ensuring Americans can buy food and pay the rent.

Here’s a look at the potential impact of cutting benefits right now:

The GOP argument

The Senate GOP’s latest $1 trillion plan calls for the reduction in increased unemployment benefits from $600 to $200 a week for 60 days, or until states are able to provide a 70 percent wage replacement. Some Republican senators are rolling out their own proposals that would reduce the benefits with varying levels of wage replacement.

Their argument is that payments should be pegged to workers’ former wages as an incentive for them to seek jobs instead of remaining on benefits.

“Should we have generous unemployment insurance in this crisis? Of course,” McConnell said on the Senate floor Wednesday. “But obviously we should not be taxing the essential workers who’ve kept working so the government can pay their neighbors a higher salary to stay home.”

Under the GOP plan, weekly benefits would drop from a national average of $920.68 per week to $520.68 per week, an average overall cut of 55 percent, according to a recent analysis by The Century Foundation, a progressive think tank.

Laid-off workers would lose more than $10 billion per week, under the GOP proposal. And by the end of September, the losses would reach $90 billion, the analysis found.

But White House economists say the checks aren’t stimulating the economy.

Do not repeat this idiot notion that giving people money is somehow a stimulus to the economy,” said Stephen Moore, a conservative economist and outside adviser to President Donald Trump, in an interview. “I mean, in that case we could just give everybody $100,000 and we’d all be rich right? It’s just so stupid.”

The impact on the economy

It’s a “meaningful hit to the economy,” if lawmakers reduce or cut off the enhanced benefits, wrote Mark Zandi, chief economist at Moody’s Analytics. He estimates that cutting the benefit to $200 per week as the GOP has proposed would cost nearly 1 million jobs by the end of the year and raise unemployment by 0.6 percentage points.

Other estimates of job losses are higher. Economists caution that a reduction in benefits could spark a drop in demand, setting off a “vicious cycle” that eventually results in the permanent loss of millions of jobs. Slashing the extra $600 week could destroy as many as 5 million jobs, according to an analysis by the left-leaning Economic Policy Institute.

“People will have to make terrible choices between things like medicine and rent, but it also means that they will no longer be buying things that they had been buying, and the workers that produce the goods and services that they will no longer be buying will lose their jobs,” said Heidi Shierholz, EPI policy director and former Labor Department chief economist. “And the vicious cycle is set off. So it’s terrible macroeconomic policy.”

Federally enhanced unemployment benefits led to a 10 percent increase in consumption among those out of work when they were first rolled out, according to an analysis by the JPMorgan Chase Institute, estimates that have alarmed business groups.

A disruption could result in a drop in spending as high as 20 percent, the research found.

“Small businesses desperately need the consumer demand” Small Business for America’s Future, a coalition of small business owners, said in a statement. “We need legislation that puts money in the hands of people who will spend it at local small businesses. The future of our Main Street economies depend on it.”

Rachel Greszler, a senior policy analyst at the conservative Heritage Foundation, agreed that the change in benefits will have short-term negative impacts on the economy. But she warned the increased spending will have the longer-term consequence of running up the national debt.

“If you continue excessively high payments, then you end up just trading a global health pandemic for a fiscal crisis,” she said.

The impact on Black and Hispanic workers

Because Black and Hispanic workers are disproportionately reliant on unemployment aid, slashing the benefits could do permanent damage to the economic well-being of those demographics, already among those the pandemic has hit hardest. Forty-seven percent of recipients of state unemployment benefits in July are projected to be nonwhite, according to the Congressional Budget Office.

“These universal approaches to addressing economic issues ignore the recent and past history of structural racism, and how wealthy is distributed in the country,” said Andre Perry, a research fellow at Brookings Institution.

“We need to think about the long-term protection of the most vulnerable,” Perry said. “And unemployment insurance provides that safety net for now.”

Is a $600 payment causing workers to stay home?

The Congressional Budget Office estimated in June that extending the boost by six months would likely lead to greater economic output in the second half of 2020. But the non-partisan scoring office also forecast that the work disincentive would lead to lower levels of employment for the remainder of the year and into 2021 — an estimate Republicans have seized on during discussions over the benefits.

Yale University researchers recently found “no evidence” that the boosted unemployment benefits increased layoffs at the outset of the pandemic or discouraged workers from returning to their jobs over time, according to a report based on data from the business scheduling software company Homebase.

“If there is still really depressed labor demand, asking people to go out and search more intensely will not necessarily yield higher employment,” said Dana Scott, the primary author of the report. “And on the flip side of the coin, reducing people’s income will also decrease those stimulus effects…where they’ll have income replaced, go out and spend more money, which isn’t just for the economy.”

But those close to the White House disagree. “I get ten calls a day from employers telling me the workers will not come back on the job,” Moore told POLITICO. He pointed to the 5.4 million new job openings reported by the Bureau of Labor Statistics in May. “That’s a lot of jobs,” Moore said, “but look that’s not 20 million.”

The most recent jobs report from BLS indicated that the number of workers who permanently lost their job increased to 2.9 million in June. Some 9.1 million workers would have preferred working full-time, but were only able to get part time jobs in June. And 8.2 million individuals said they would like a job, but were unavailable or not actively seeking out work in June, according to BLS.

What about just sending stimulus checks?

Republicans’ proposal would suggest another round of stimulus checks, similar to those enacted via a previous round of aid, in an effort to bolster consumption.

“The way the previous bill was crafted, five out of six workers are actually making more staying at home than going back to work,” McConnell said on CNBC’s “Closing Bell” Tuesday. “And remember, all of these folks are going to get another $1200 in direct payment.”

But the cash is a less efficient way to rejuvenate the economy because it is not as narrowly tailored, economists warn.

“Spending less on unemployment insurance and also doing the stimulus check … is terrible economic policy,” Shierholz said. “You’re taking something that’s very, very well targeted — getting money to people who’ve lost their jobs — and giving it broadly.”

This blog originally appeared at Politico on July 30, 2020. Reprinted with permission.

About the Author: Rebecca Rainey is an employment and immigration reporter with POLITICO Pro and the author of the Morning Shift newsletter.

About the Author: Eleanor Mueller is a legislative reporter for POLITICO Pro, covering policy passing through Congress. She also authors Day Ahead, POLITICO Pro’s daily newsletter rounding up Capitol Hill goings-on.


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A gap in federal unemployment benefits is now unavoidable. Here’s why.

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State offices will need weeks to reprogram their systems to account for an extension of the $600 weekly federal payments that expire on Saturday.

Tens of millions of laid-off American workers will go weeks without federal jobless aid — because Congress hasn’t renewed the benefits in time for overwhelmed state unemployment systems to adjust their computers.

State offices will need weeks to reprogram their systems to account for an extension of the $600 weekly federal payments that expire on Saturday — or any changes that Congress makes to the benefit amount or eligibility rules. That comes on top of hardships faced by workers in states like Washington and Nevada, who are already waiting months to get their first payments in the middle of the coronavirus pandemic because their unemployment offices can’t handle the historic flood of claims.

In some states with particularly antiquated systems, it’s already too late to prevent a lapse, even though the federal benefits haven’t officially expired, according to people familiar with how the systems work.

“In some states, it could take quite a bit of time, and it could cause severe delays,” said Arindrajit Dube, a professor of economics at UMass Amherst. “This is the kind of thing you don’t try to change in the middle of a pandemic.”

A gap in the federal program could be devastating for laid-off workers, many of whom are on the verge of eviction and are already behind on their bills. The $600 federal check comes on top of workers’ normal benefit payments which average around $340. The weekly benefit amount varies by state, and is as low as $235 per week in Mississippi.

“I know my clients are really fearful that they’re going to have a deluge use of bills that are going to become due very quickly, and that $600 supplement was really critical to ensuring that they could meet those bills,” said Tori Dempsey of Legal Services of Eastern Missouri, which offers free legal services to lowincome Americans. “Without it, and without any prospect really returning to any sort of secure employment, it’s really unnerving for a lot of them.”

Dempsey said that while some of her clients have been called back to work in recent weeks, their shifts have been reduced to one or two days a week.

“The work just isn’t there for them,” she said.

It’s unlikely Congress will act before Saturday, but even if they do, states have already prepared their systems to cut off the benefits. Republicans want to cut the amount or change how benefits are calculated to prevent workers from making more money on unemployment than they did at their jobs. Democrats are insisting on maintaining the benefit as-is.

The GOP’s next relief proposal is expected to include a temporary flat payment for unemployment insurance for two months, but the final details have not yet been released. President Donald Trump this week said other changes could include capping benefits at 70 percent of a worker’s prior wages.

Any changes could create an accounting disaster for the state systems, which are still struggling to keep up as the number of new workers applying for unemployment benefits each week remains at nearly two times the peak seen during the Great Recession.

More than one million new unemployment applications have poured into state agencies each week for 17 straight weeks, piling onto state backlogs. Across the country about 10 to 15 percent of applications are still waiting to be processed, said Andrew Stettner, a fellow at the Century Foundation.

Hundreds of laid-off workers from Alabama to Oklahoma made headlines in recent weeks as they resorted to camping out in front of unemployment offices, demanding payment.

In Nevada, some workers have been waiting on their unemployment checks for months.

Rhea Gertken, an attorney with Nevada Legal Services, said her clients call the unemployment hotline first thing in the morning, and within minutes, the number of claims that can be processed that day has been reached.

“Say someone calls in at eight o’clock in the morning. Almost immediately, what they’ll get is a recording that says the queue is full for the day, call back later,” she said.

There also are problems with the pandemic unemployment assistance program — a payment created by Congress to send jobless aid to workers ineligible for traditional unemployment benefits, such as gig workers.

Nevada was the last state in the nation to set up its PUA program and Gertken said there’s also been confusion over whether workers should file for unemployment or through the pandemic unemployment assistance program, leading to even more delays.

This week a Nevada judge ruled that the state unemployment office must start paying benefits to some out-of-work gig and independent workers who qualified but haven’t received payments.

The state’s Department of Employment, Training and Rehabilitation, the agency that administers unemployment, didn’t respond to a request for comment.

In Washington state, laid-off workers have been waiting an average of three months to finally receive their benefits, Behnaz Mansouri, an attorney at Unemployment Law Project in Washington state, told POLITICO.

Once workers finally receive their benefits they’re “beyond grateful” and “relieved,” Mansouri said, “However, at this point, they may have already lost their home, their car may have already been repossessed. A lump sum payment coming in doesn’t necessarily resolve recurring expenses that need to be paid in a timely fashion.”

Washington state is still so overwhelmed with new unemployment claims that it has resorted to completely shutting off its phone system except to those who need accommodations for disabilities or because they don’t have internet access.

A spokesperson for Washington’s Employment Security Department said the agency instead focused the bulk of its agents on “making outbound calls to claimants.” ESD said that it began accepting inbound calls again earlier this week.

In Texas, it can still be difficult to just file a claim, said Karen Miller, executive director of the Texas Legal Services Center. Just this week, one of her clients called from 1 p.m. to 7 p.m., every thirty minutes. That person was never able to get through, she said.

Miller also said many of the low-income workers she advises don’t have access to a computer, and have trouble applying through their phones. Before, she’d send the workers to public libraries, but they are now closed due to the coronavirus.

The timing of the lapse in the $600 federal payment couldn’t be worse, she said, as it coincides with the moratoriums on eviction expiring.

“That’s the kicker. Eventually, in Texas, tenants have to be able to pay their rent and so if there’s too much of a delay in that benefit being there, they’re really going to suffer,” she said.

This blog originally appeared at Politico on July 23, 2020. Reprinted with permission.

About the Author: Katherine Landergan covers the state budget, tax policy and labor issues for POLITICO New Jersey.

About the Author: Rebecca Rainey is an employment and immigration reporter with POLITICO Pro and the author of the Morning Shift newsletter.


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Maine AFL-CIO Calls on Senate to Extend $600 Lifeline to Unemployed Workers

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Working people across the United States have stepped up to help out our friends, neighbors and communities during these trying times. In our regular Service + Solidarity Spotlight series, we’ll showcase one of those stories every day. Here’s today’s story.

The Maine AFL-CIO, led by President Cynthia Phinney (IBEW), is publicly pushing its senators to support renewing the federal $600 weekly unemployment payment for those who are out of work as a result of the pandemic. This weekly payment was included in the CARES Act and is set to expire at the end of July. “With double-digit unemployment, it is appalling and morally repugnant that the U.S. Senate would even consider cutting this critical lifeline to Maine families,” Andy O’Brien (UFCW), the state federation’s communications director, told the Beacon. The Maine Department of Labor announced last week that it will extend the maximum length of time workers can remain on unemployment benefits by 13 weeks.

This blog originally appeared at AFL-CIO on July 14, 2020. Reprinted with permission.

About the Author: Aaron Gallant is a contributor for AFL-CIO.


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$600 weekly jobless benefit will likely lapse before more aid is passed

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Laid off workers would see a lapse in the additional benefits — reducing their weekly income by more than two-thirds in many states.

Congress will likely allow the $600-a-week boost in unemployment benefits to expire at the end of this month if lawmakers follow Senate Majority Leader Mitch McConnell’s proposed timeline for the next round of pandemic aid.

When the Senate returns to Washington from recess next Monday, McConnell said he will begin “socializing” the GOP’s next rescue package and start the legislative process with Democrats. He said during an event in Corbin, Ky., Monday he expects that a bill will come together “sometime within the next three weeks, beginning next week.”

The $600 additional weekly unemployment benefit created under the March CARES Act is set to expire in the weeks “ending on or before July 31.” But because most jobless benefit payments end on Saturdays, economists say the last payment will actually land on the week ending July 25.

Although the GOP has recently signaled that jobless aid may be a part of the next rescue package, unless another bill is signed by the president before the aid expires, laid off workers will see a lapse in the additional benefits — reducing their weekly income by more than two-thirds in many states.

“Because state unemployment benefits need to be extended by July 25 in order to be processed by states administering their programs, McConnell’s announcement that the Senate will not even begin drafting or negotiating legislation until next week effectively makes a lapse in those expanded payments unavoidable,” Rep. Don Beyer (D-Va.), vice chair of Congress’ Joint Economic Committee, told POLITICO in a statement.

Beyer said the Democrats’ HEROES Act, which passed the House in May, would extend those benefits through the end of January.

“Now we are out of time,” Beyer said. “All of this could have been avoided if McConnell had acknowledged the economic emergency facing our country and acted on it sooner.”

Republicans and the Trump administration have opposed extending the benefitat $600 a week but have recently indicated that unemployment insurance could be on the table in the next aid plan.

During another event at Rockcastle Regional Hospital Monday in Mount Vernon, Ky., McConnell said the next package would have a “continued emphasis on jobs, meaning unemployment insurance for those who are unable to get back to work.”

He said he’s been discussing the next legislation with Treasury Secretary Steven Mnuchin, who said last week the GOP would “figure out an extension” to the enhanced benefits that works “for companies and for people who will still be unemployed.”

White House spokesperson Judd Deere told POLITICO that “maintaining UI benefits at current levels does not incentivize returning to work,” but added that “UI reform is a priority for this White House in any phase four package and we are in ongoing discussions with the Hill.”

Once the additional unemployment payment ends, out-of-work Americans could see their benefits drop by anywhere from 50 to 85 percent according to Century Foundation fellow Andrew Stettner.

The size of an unemployment check depends on the recipient’s income and on rules that vary from state to state, but the average weekly payment over the past year was $342, according to the Labor Department.

This blog originally appeared at Politico on July 14, 2020. Reprinted with permission.

About the Author: Rebecca Rainey is an employment and immigration reporter with POLITICO Pro and the author of the Morning Shift newsletter.


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Striking Out with Unemployment Benefits: Minor League Baseball (MLB) Players Hurdle to Collect Unemployment Insurance Benefits

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MLB and its players have begun discussing a way to restart the 2020 season following the COVID-19 delay. During this process, more than 1,000 players have been released from their contracts and have become free agents according to Forbes, while others are facing uncertainty on if they will also be released from their contracts or if their season will ever get underway. Although the MLB Players Association is officially moving forward with a shortened season, this association does not represent minor league baseball players (“MiLB”). Many baseball experts speculate that the minor league season will be cancelled; however, while these discussions are underway many players remain “unemployed.”  During these uncertain times, questions surrounding MiLB players’ ability to collect unemployment have swirled. Unlike MLB players who often have multi-million-dollar contracts, MiLB players typically only make around $14,000 per season, with many of them having to turn to gig jobs to make ends meet. At the beginning of April, MLB announced that it would be paying MiLB players $400 per week, but this is a stipend and does not count as a salary. 

Yahoo Sports, The Washington Post, and many other news sources have written that MiLB players cannot apply for unemployment benefits because they are under contract, meaning they are subject to the Federal Unemployment Tax Act, subsection 3304(a). This Act stipulates that professional athletes cannot apply for unemployment benefits if they are in between seasons as long as they have reasonable certainty that they will be employed in the following season. According to the Department of Labor, an athlete has reasonable assurance of performing services in the next athletic season if there is a contract; if the employer expressed interest to the player in hiring them for the next season; or if the athlete expresses an intent to participate in the sport for the next season. There is no direct language in the contract stipulating that players cannot apply for unemployment benefits.

George Wentworth from the National Employment Law Project argues that MiLB players are eligible because they were not between seasons, instead that the season had started because the players had begun spring training. However, according to Yahoo Sports, it is ambiguous whether spring training is considered part of the official season because although many teams had started spring training, they only get paid in season and would not receive a paycheck until April. If spring training is considered part of the season, then players are able to apply for unemployment benefits because they are technically unemployed during their official season. In this case, players should apply for unemployment benefits through their state. If they are denied, they should appeal, explaining that they are unemployed during their season. The players should also be able to apply for Pandemic Unemployment Assistance (PUA). If spring training is not considered part of the season, players may still be able to make the argument that they are eligible for unemployment because they do not have reasonable certainty that they will play in a successive season. This argument is now bolstered by the multitude of teams, a full list of released players can be found on MLB Trade Rumors’ website, that have released their MiLB players in droves. 

William B Gould IV, a law professor emeritus at Stanford University and the former National Labor Relations Board chairman, says that although players may not be able to apply for the typical state unemployment benefits, they are considered independent contractors and “gig workers,” who are now entitled to pandemic unemployment compensation. 
Either way, Wentworth encourages all MiLB players to apply for unemployment insurance in any state where they were employed. For a list of state’s unemployment policies and procedures, players can visit the Filing an Unemployment Claim in Your State page on the Workplace Fairness website.

About the Author: Kendall Speer is a legal intern at Workplace Fairness. She graduated from Northwestern University with a Bachelor of Science in Social Policy. She then worked for the Jacobson Group, an insurance staffing firm, for two years after graduation. She is now a first-year law student at Boston University of Law. 


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Workers filed 1.5M unemployment claims as infections spike

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The continued influx of claims for jobless benefits more than three months into the pandemic is raising doubt among some economists that the U.S. will experience a rapid recovery.

New unemployment claims continued to roll in last week at historically elevated levels, as American workers filed 1.5 million initial applications for aid, the Labor Department reported on Thursday.

On top of that, more than 760,000 people applied for benefits under the new temporary Pandemic Unemployment Assistance program created for those ineligible for traditional unemployment benefits like gig workers and the self-employed. While economists caution that there is likely overlap, added together, the number of new claims filed last week could be well over 2 million.

The number of workers still seeking unemployment more than three months into the pandemic has sparked doubt among many economists that the U.S. is on the road to a speedy recovery as President Donald Trump has proclaimed. 

“The tens of millions that remain unemployed are an increasingly important signal of labor market weakness,” Glassdoor Senior Economist Daniel Zhao wrote in reaction to the report. “The labor market’s path to recovery is littered with obstacles that could smother the rebound, from the expiration of federal support for businesses and workers to depressed consumer demand to the resurgence in Covid-19 cases.”

California reported the largest number of claims last week, with 243,344 new applications filed. Georgia, one of the first states to reopen its economy in April, followed with 130,766 new claims. 

The economic recession triggered by the pandemic has led to nearly 46 million new applications for unemployment aid in a little over three months. But that number likely includes duplicate applications, as some states have instructed workers to reapply if they were first found ineligible.

Heidi Shierholz, a senior economist at the Economic Policy Institute, suggested that the number of workers currently receiving benefits or waiting for them is probably closer to 34.5 million. That number includes the workers who have filed “continued claims” — or those who are still seeking unemployment benefits for another week.

That translates into more than one in five workers relying on the unemployment system to weather the pandemic, according to Shierholz.

Federal Reserve Chair Jerome Powell on Tuesday warned that the economy can’t fully recover until the public is sure the coronavirus has been contained. 

Recent spikes in Covid-19 cases in areas that restarted their economies have also caused some states and localities to hit the brakes on their reopening plans

Trump has seized on recent positive economic indicators to make the case that the country is headed for a sharp rebound. U.S. retail sales jumped 17.7 percent in May, the Commerce Department reported this week. And the unemployment rate unexpectedly dropped to 13.3 percent that month, down from 14.7 percent in April — a rate still not seen since the Great Depression-era of the 1930s. 

Labor Secretary Eugene Scalia brushed aside comparisons to the Depression in a speech to the Heritage Foundation’s National Coronavirus Recovery Commission this week.

“We came into our current economic difficulty by a completely different path than prior downturns: It was self-imposed, and purposely short-term,” Scalia said. “It did not result from an economic weakness — the economy had been very strong. The comparisons to the Great Depression have always been misplaced — our circumstance is different.”

Some economists have attributed the better-than-expected economic numbers to the multitrillion-dollar relief programs that Congress created to bolster small businesses and American bank accounts. 

But laid off workers will soon lose the enhanced unemployment benefits provided as part of that aid. 

A $600 additional weekly unemployment benefit created under the massive relief package passed in March will expire on July 31, and Republicans have been opposed to extending it

In a semiannual report to Congress last Friday, the Fed warned that a wide variety of data indicate “an alarming picture of small business health during the Covid-19 crisis,” and suggested small businesses may need more government support.

Yet with police reform taking up much of the discussion on Capitol Hill, Republicans aren’t expected to move on another package for weeks. 

White House trade adviser Peter Navarro said over the weekend that Trump is looking for at least $2 trillion in the next round of relief.

But Senate Majority Leader Mitch McConnell wants to see a much lower price tag. 

Democrats have already forged ahead with another round of aid. The House passed a $3 trillion measure last month, which would provide direct relief to American families and state, local and tribal governments. 

This blog originally appeared at Politico on June 18, 2020. Reprinted with permission.

About the Author: Rebecca Rainey is an employment and immigration reporter with POLITICO Pro and the author of the Morning Shift newsletter. Prior to joining POLITICO in August 2018, Rainey covered the Occupational Safety and Health administration and regulatory reform on Capitol Hill. Her work has been published by The Washington Post and the Associated Press, among other outlets.


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Another awful week of Americans seeking state and federal job benefits: 2.25 million file new claims

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We’ve had plenty more news this week indicating just how bad things are economically now and how long they are likely to remain bad. Federal Reserve Chairman Jerome Powell, who has warned that gross domestic product could drop 30% this quarter, on Wednesday reinforced what other analysts have said about the crunch affecting American workers: ”It’s just going to be very hard to say. But my assumption is that there will be a significant chunk, well into the millions—I don’t want to give you a number because it’s going to be a guess—but well, well into the millions of people who don’t get to go back to their old job. In fact, there may not be a job in that industry for them for some time. There will eventually be, but it could be some years before we get back to those people finding jobs.” He noted that low-wage workers, women, African Americans and Latinos have been hit especially hard.  

Another big bunch of people who may be among those workers who find themselves in that same boat filed new claims for state or federal unemployment benefits in the week ending June 6, the Labor Department reported Thursday. Together, on a non-seasonally adjusted basis, 1.537 million filed new claims for state benefits and 705,676 filed for federal benefits under the Pandemic Unemployment Assistance that covers free-lancers and other workers not eligible under state programs. All told, those who have filed and are receiving or waiting to receive benefits now total 35.4 million, a decrease from last week’s non-seasonally adjusted 37 million tally.

Because of the volatility being experienced in the labor market right now, the seasonal adjustment distorts what is actually happening in the labor market week to week. Moreover, the PUA filings are not seasonally adjusted. Mashing together adjusted and unadjusted skews the outcome. 

That non-seasonally adjusted 35.4 million breaks down like this:

Regular State UI Initial Claims…………… 3.2 million
Regular State UI Continuing Claims…..18.9 million
PUA Initial Claims………………………………2.8 million
PUA Continuing Claims……………………..9.72 million
Assorted Other Categories………………..766,537

If those 35.4 million were the total number of unemployed, the unemployment rate would be about 22.5%But counting unemployment benefit recipients isn’t how the Bureau of Labor Statistics tallies the unemployment rate. Last week, the bureau announced that the rate for May was 13.3%—with the last paragraph of an end-note pointing out that had workers who should have been marked as “unemployed on temporary layoff“ counted correctly, the rate would have been 16%. But this is nowhere near the 22.5% roughly indicated by the count of unemployment benefit recipients.

A few have asserted that the miscategorization of workers is due to some connivance at the Bureau of Labor Statistics to make Donald Trump look better. But former Obama-appointed BLS officials as well as other experts who are no pals of Trump have weighed in to say bureau procedures and the integrity of statisticians there prevent that from happening. 

But in addition to the mistake, there was a big error in judgment at the BLS. Public acknowledgement of the error in categorizing some workers should have been made not at the end but as preface to the bureau’s job report. If it had been, newspaper and online news outlets and Foxaganda wouldn’t still be touting the 13.3% number as if the more accurate 16% estimate didn’t exist. Perhaps after two misses on that score, the BLS will do better in the June report. 

No matter what the actual unemployment count is, it’s dreadful, far worse than the Great Recession at its worst when 10% were unemployed for a single month late in 2009. What that means massive stimulus on top of the trillions of dollars already paid out. More stimulus and a lot more oversight. Of course, the Senate Republicans stand firm against that, some of them citing the job report from last week as an indication that the economy will do just fine without it. This would be nonsense even if the perils of reopening the economy prematurely weren’t showing up in state after state as spikes in cases of COVID-19. 

At the Economic Policy Institute, Josh Bivens and David Cooper write:

  • If policymakers do nothing at the federal level to address these shortfalls, the United States could end 2021 with 5.3 million fewer jobs, with losses in every state.
  • Further, if Congress passes some level of aid that is insufficient—less than $1 trillionthey will needlessly guarantee a significant job gap by the end of 2021.
    • If they pass $500 billion of aid over that time, the jobs gap will likely be roughly 2.6 million. If they pass $300 billion of aid, the jobs gap will likely be roughly 3.7 million.
  • While empirical estimates of the shortfall should guide policymakers’ thinking, they can (and actually should) avoid putting a firm sticker price on state and local aid by tying this aid to economic conditions. If the economy recovers faster than the forecasts driving the $1 trillion estimated shortfall indicate will happen, then less aid would be needed. If instead recovery lagged, more would be needed.
  • Finally, filling in the estimated shortfalls would merely return state and local governments to their pre-crisis fiscal status quo. But the unique features of the current economic shock will put greater demands on public services than existed before the crisis. To go beyond macroeconomic stabilization and promote the general welfare, even more federal aid to these governments is likely needed.

This is wise and necessary. But repairing the economy to get back to the status quo isn’t enough. Not when the economy had plenty of chronic problems well before the Pandemic Recession got hold of us. Transformation is called for. Low interest rates plus people losing jobs they’ll never get back plus the need for building a sustainable economy to address climate crisis presents us with the opportunity for making that transformation if we are smart enough to grasp it.

For now, the Federal Reserve made clear on Wednesday that the current levels of interest are going to be with us for quite some time and the Fed continues with its relaxed approach. Stephen Stanley, chief economist at Amherst Pierpont Securities, told Bloomberg, “The Fed is clearly very sensitive to the fact that the Great Depression was made worse by not taking action, and they don’t want to make that mistake again. The Fed, at least right now, wants everyone to believe that it will be easy for as far as the eye can see.”

This blog originally appeared at Daily Kos on June 11, 2020. Reprinted with permission.

About the Author: Timothy Lange is a member of the Daily Kos staff.


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How the U.S. economic response could change as people go back to work

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Despite the drop in the unemployment rate in May, many economists feel further aid is needed.

As Congress debates whether to allocate further relief to shore up the U.S. economy and get workers back on their feet, the unemployment rate has suddenly and unexpectedly fallen.

Here’s a look at how the new numbers are shaping the debate over how the government can keep the turnaround going.

Unemployment insurance

Congress moved quickly to strengthen unemployment benefits in March, providing an extra $600 per week and vastly expanding who is eligible for aid. That boost in benefits is set to expire at the end of July, though Democrats are advocating to extend it at least through the end of the year.

Republicans have raised concerns that the enhanced unemployment benefits could discourage people from returning to work, because in some cases they are making more than their original wages. Stephen Moore, a conservative economist and outside adviser to President Donald Trump, said Friday that the topline number of jobs being created could have been higher for May if the unemployment sweetener were not in place.

“We need to go back to the old unemployment insurance system as quickly as possible now,” Moore said.

But others say the higher level of aid is bolstering consumer confidence and keeping demand closer to normal levels as businesses begin to reopen.

“Every dollar in unemployment insurance churns in the community, keeping it afloat in recessions,” Michele Evermore, a senior policy analyst at the National Employment Law Project, wrote on Twitter. “Gutting access to benefits doesn’t just hurt individual workers, it hurts communities.”

Adam Ozimek, the chief economist at Upwork, a platform that connects businesses with freelancers, said Congress could consider a compromise by extending the unemployment insurance booster but combining it with something akin to a “return to work” benefit — meaning workers have access to aid both if they remain unemployed and if they head back to the office.

“The goals are to make sure we’re not wreaking havoc upon the 20 million people who are still out of work, and giving them support without holding them back from going back to work when they can,” Ozimek said. “I think there’s a balanced approach here that continues to make unemployment generous but also gives people money when they go back to work.”

While the unemployment rate for adult women, adult men, white workers and Hispanic workers dropped from April to May, it rose slightly for black workers to 16.8 percent, the Labor Department reported. That could fuel a push from Democrats and labor leaders to extend the program, as they have argued in recent days that allowing it to expire on July 31 would hit black communities acutely, particularly as protests over racial inequality spread across the country.

“It needs to be passed quickly,” AFL-CIO President Richard Trumka said during a press call Wednesday. “People of color have been hit the hardest by this pandemic. So if we allow the unemployment extension to lapse, it hurts them, and it hurts them bad.”

Paycheck Protection Program

The PPP has doled out more than $510 billion in government-backed loans to support small businesses and keep workers on payrolls. And economists appeared relatively unified in crediting the program for some of the positive aspects of Friday’s report.

“The largest gains were in sectors that appear to be beneficiaries of both reopening across an increasing number of states, but also potentially some positive effect from PPP loans bringing small business workers back into employment,” Morgan Stanley economists wrote in a research note Friday.

Mark Hamrick, senior economic analyst for Bankrate, said the effort was “no doubt having some impact” but warned that the aid “is not unlike a performance-enhancing drug for the economy, and the benefits of that cannot last forever.”

Hamrick said it will take time to see how sustainable the federal program to supplement small business’ income will be. “Part of the worry is that that could have an unintended negative consequence down the road” he said, if the positive job growth seen in May “did turn out to be essentially a federally induced sugar high.”

State and local government impact

The largest share of new job losses recorded in the May jobs report were in government, which has now shed 1.5 million positions in two months. That underscores what some economists and lawmakers say is an urgent need to provide funding to states, which have seen a sharp drop in tax revenue amid the coronavirus shutdowns and are laying off public workers as a result.

Providing aid to states is “a really important component of the next phase of the relief,” Ozimek said. “It’s going to be really hard to have a V-shaped recovery if the recovery doesn’t extend to state and local employment.”

The House Democrats’ Heroes Act — a fifth phase of aid that the House has passed but the Senate has yet to take up — would carve out at least $915 billion in aid to state and local governments. Proponents say that doing so would particularly help minorities, who make up a significant proportion of the workforce at the local level.

Moore rejected the idea that Congress should provide any such aid, saying that doing so would enable states to stay shut down.

“The best thing for these states to do is open their economies,” he said, “so they can get the tax revenues and so they can hire back the workers that they might need.”

This blog originally appeared at Politico on June 5, 2020. Reprinted with permission.

About the Author: Megan Cassella is a trade reporter for POLITICO Pro. Before joining the trade team in June 2016, Megan worked for Reuters based out of Washington, covering the economy, domestic politics and the 2016 presidential campaign. It was in that role that she first began covering trade, including Donald Trump’s rise as the populist candidate vowing to renegotiate NAFTA and Hillary Clinton’s careful sidestep of the Trans-Pacific Partnership.

About the Author: Rebecca Rainey is an employment and immigration reporter with POLITICO Pro and the author of the Morning Shift newsletter. Prior to joining POLITICO in August 2018, Rainey covered the Occupational Safety and Health administration and regulatory reform on Capitol Hill. Her work has been published by The Washington Post and the Associated Press, among other outlets.


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Millions of gig workers are still waiting for unemployment benefits

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Rebecca Rainey

Most of the estimated 23 million independent contractors and gig workers made newly eligible last month for unemployment benefits during the coronavirus pandemic are still waiting for relief.

Six weeks after the pandemic set off a continuing wave of massive layoffs, only 21 states have started paying out benefits to self-employed workers and others not traditionally eligible, according to the Labor Department. That’s up from 10 last week. The payments are being made under a new temporary program, Pandemic Unemployment Assistance.

New Jersey is one of the states where self-employed workers are still waiting. More than 100,000 self-employed workers applied for jobless benefits there over the past several weeks, but the state won’t begin paying out the benefits until Friday, according to New Jersey state officials. They said the state will then need to take more time to verify those workers’ eligibility.

“The Department has worked hard over the past month to get this program up and running despite the unprecedented challenges of the coronavirus, and it is now available,” said New Jersey Labor Commissioner Robert Asaro-Angelo. “While it will take time to determine eligibility for everyone who seeks PUA benefits, the process has begun.”

States reporting the largest number of weekly claims, including California and Florida, have just started to get their systems up and running this week.

California, which launched its new program on April 28, has received 190,000 applications already from self-employed and contract workers, according to Governor Gavin Newsom. But state officials have warned the program is threatened by its overloaded system.

“We are getting our arms around this unprecedented volume,” Newsom said Wednesday.

California’s unemployment system has been slowed and strained by the more than 3.7 million applications it’s received since layoffs began in early March, officials say. The state has distributed more than $6 billion in benefits so far.

Florida, whose unemployment system has also been overwhelmed as more than a million people struggled to get assistance, did not start accepting applications from independent contractors and those are self-employed until this past Tuesday.

The instructions sent out by the Department of Economic Opportunity urged people who had turned in applications before April 4 to try again now. DEO’s own data shows that more than 266,000 people who had applied with the state since March 15 had been deemed ineligible, although the information released by the agency does not specify why people are being turned away.

Labor Secretary Eugene Scalia affirmed last week that his agency is “working very closely every day with states across the country to help them get these benefits to the Americans who are entitled to them.”

According to DOL, it’s delivered more than $750 million of $1 billion in emergency administrative funding provided by Congress to state unemployment offices to help them handle the surge in claims and implement the new program. “As they request this funding, we’re distributing it quickly,” Scalia said. “And if they don’t request it. We’re contacting them to see how we can help.”

States have been struggling to figure out how to calculate weekly benefit levels for these self-employed workers, whose wage information may be contained on multiple forms and is harder to verify.

California, which last year passed a sweeping bill aimed at compelling businesses to reclassify many independent contractors as employees, has said gig economy workers should be eligible to apply for benefits under the state’s normal unemployment insurance program.

But somedrivers for Uber and Lyft in California say the state is calculating their weekly benefits to be $0, because their companies aren’t sharing payroll information with the state unemployment agency.

Those app-based workers must then request an investigation from the state into their wage information — adding more time to the process.

Workers have also complained they haven’t even been able to apply for benefits, hindered by jammed phone lines and crashing websites, as state unemployment agencies scrambled to beef up their systems following the passage of the massive unemployment benefit extension included under the CARES Act.

Florida’s unemployment website, which was first installed in 2013, had been routinely been flagged by state auditors before the coronarvirus outbreak started. But the surge in jobless claims overwhelmed the system, forcing the state to leave it offline for hours. It was offline all of last weekend as the state tried to play catch up on processing claims. Florida decided to start accepting paper applications due to the website’s constant failings.

The DOL’s Office of the Inspector General recently warned that state legacy computer systems used to process unemployment benefits weren’t up to the job, and threaten “the management and oversight of UI benefits.”

“The risk of fraud and improper payments is even higher under PUA because claimants can self-certify their UI qualifications,” the IG wrote, urging the DOL’s Employment and Training Administration to work with states to establish better methods of detecting fraud and recovering improper payments.

DOL officials say the department has been reaching out to the states to discuss and offer assistance with IT and call center issues.

But according to economists, all workers, including those who are eligible for traditional benefits and don’t have to apply under the new federal program, have been struggling to get the unemployment relief in their pockets.

For every 10 people who said they successfully filed for unemployment benefits during the past month, three to four additional people tried to apply but could not get through the system, according to an survey conducted by the left-leaning Economic Policy Institute.

In total, DOL’s data indicates only 14 percent of the 12 million workers who filed for benefits in the month of March were paid an unemployment check, said Andrew Stettner, senior fellow at The Century Foundation. “While many of the claims that started in mid-March were likely paid not until April,” he said, “this figure is yet another sign underscoring the major structural challenges facing the unemployment program as it responds to the COVID-19 crisis.”

How an individual’s claim is processed varies widely from state to state.

“On the high end, Rhode Island made initial payments to 51 [percent] of the 60,000 individuals who filed claims,” he said. “On the low end, Florida only paid 2.4 [percent] of the 280,500 individuals who managed to file a claim, the third lowest in the country, just above Indiana, which stood at 2 [percent].”

In Iowa, one of the first states to get its PUA system up and running, officials pointed to its low unemployment rate and rurality as reasons why it was able to move so quickly.

“For the last couple years, our unemployment’s only been like 2.5 percent,” Iowa State Treasurer Michael Fitzgerald said. “So our unemployment fund started out really full.”

“In a lot of areas we didn’t have the shutdown as early as some of the other states,” he added, “so we were probably in a better spot than most other states, and able to attack it.”

Eleanor Mueller, Gary Fineout, Katy Murphy and Katherine Landergan contributed to this report.

This article was originally published at Politico on April 30, 2020. Reprinted with permission.

About the Author: Rebecca Rainey is an employment and immigration reporter with POLITICO Pro and the author of the Morning Shift newsletter.

Prior to joining POLITICO in August 2018, Rainey covered the Occupational Safety and Health administration and regulatory reform on Capitol Hill. Her work has been published by The Washington Post and the Associated Press, among other outlets.

Rainey holds a bachelor’s degree from the Philip Merrill College of Journalism at the University of Maryland.

She was born and raised on the eastern shore of Maryland and grew up 30 minutes from the beach. She loves to camp, hike and be by the water whenever she can.


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Restaurants’ bailout problem: Unemployment pays more

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Ian Kullgren March 9, 2018. (M. Scott Mahaskey/Politico)

Restaurants say their industry needs its own targeted recovery fund because the bailout package Congress passed last month is making it more attractive for their staff to draw unemployment benefits than to continue working.

The new Paycheck Protection Program waives repayment of small business loans if the borrower uses 75 percent of the money to maintain payroll, a measure intended to reduce layoffs. But with the expanded unemployment benefits included in the stimulus bill, some workers can as much as double their weekly checks if they stay unemployed.

The mismatch is particularly acute for restaurants, cafes and small shops — nonessential businesses where pay scales tend to be low that have been put into indefinite hibernation. The National Restaurant Association told Congress Monday that more than 60 percent of restaurant owners believe existing assistance programs, including PPP, are insufficient to keep employees on payroll and asked for $240 billion in aid targeted to their industry.

Restaurants represent less than 9 percent of Paycheck Protection loan recipients, but as of March accounted for the majority of layoffs nationwide as the contagion took hold.

“If the intention was to get people back to work, they’re not doing it,” said Tom Colicchio, the renowned restaurateur and “Top Chef” judge, who has been an advocate for small restaurants during the pandemic. “They’re not going to come back to work because unemployment is too attractive.”

Unemployment benefits vary by state, but in 2019, before the coronavirus crisis, the average weekly benefit nationwide was $370. A $600 sweetener that the stimulus bill added, on a temporary basis, to weekly unemployment checks raises the average weekly benefit to $970, an amount that approximates average weekly pay nationwide and is nearly double average weekly pay within the food industry: about $500 nationwide for full-time workers.

Dental assistants, security guards and travel agents similarly stand to earn more money on unemployment than they can by working.

That doesn’t make the Paycheck Protection Program a flop; indeed, the program is so popular that all available funds dried up last week. Lawmakers are now nearing a deal to add $450 billion to the $342 billionthat the Small Business Administrationhas lent.

Most of that money, however, has gone to support jobs in industries kept open during the crisis, including construction, manufacturing, professional and technical services and health care, which received $169 billion. By comparison, only $30.5 billion went to hotels and restaurants. Local stay-at-home orders could keep these businesses shut down several weeks more, and sales are projected to rise slowly under any phased economic restart because customers may well avoid public places for months.

The National Restaurant Association, in addition to requesting more funds — partly, it said, to help owners rehire and retrain workers — asked Congress to permit businesses to defer the start date of PPP loans until after local stay-at-home orders are lifted, and to allow more than 25 percent of the loans to be spent on fixed costs like rent and utilities.

The International Foodservice Distributors Association will propose similar measures Tuesday, asking Congress to allow PPP borrowers to spend only 50 percent of their loans on payroll and to increase tax credits for employee retention.

One recipient of a Paycheck Protection loan is Christian Ochsendorf, who owns several Dunn Brothers Coffee shops in the Minneapolis area. Ochsendorf says he’s been able to persuade only 40 percent of his furloughed workers to return. In Minnesota, the $600 sweetener raises the average weekly unemployment benefit above $1,000 a week. In 2019, the average weekly wage for full-time food service workers was $548.

“They’re getting paid more on unemployment than they would if they were actually working,” Ochsendorf said.

It’s the same story in Ohio, where workers can now receive $963 a week on unemployment, or slightly more than the average weekly wage. Full-time restaurant workers in the state earn, on average, less than $500.

“Heck, if they’re making more money sitting at home … I’m fearful that some may not want to come back,” said Adam Rammel, the co-owner of Brewfontaine, a bar and restaurant in Bellefontaine, Ohio.

Paycheck Protection loans cover payroll expenses for eight weeks, a time frame that many small business owners judge too short as the scope of the pandemic widens. Some owners are reluctant to accept the money at all, uncertain how they will repay the loan if their workers won’t consent to come back within the prescribed window. Unemployment benefits, meanwhile, have been extended 13 additional weeks. Even the $600 sweetener, guaranteed until July 31, will last weeks longer than a paycheck protection loan.

“The program was designed poorly,” said Amanda Ballantyne, director of Main Street Alliance, a small business advocacy group. “Business owners don’t take out loans to cover payroll when the economy is tanking.”

Many small business owners fear that they’ll have to lay off workers again when the loans run out.

“To take on a loan that has the potential to be forgiven, and then pay my staff to do nothing for eight weeks, and then furlough them in eight weeks, that doesn’t make a whole lot of sense,” said Andrew Volk, the owner of Portland Hunt and Alpine Club, a cocktail bar in Portland, Maine. “It very much feels like we’re acting as the unemployment office.”

In Maine, full-time food service workers earn $553 on average — less than 60 percent of the average unemployment benefit.

Volk did apply for a loan, but he’s used it only to pay rent. The rest is sitting in a bank account until the state allows restaurants to reopen, putting him at some risk of having to repay the federal government.

Small business advocates and some members of Congress say the U.S. should adopt a European-style grant program that gives direct payments — not loans — to businesses. The Tory government in Britain pays business owners 80 percent of their workers’ wages to keep them on payroll, up to a monthly cap of 2,500 pounds. France, Spain and the Netherlands have taken similar steps, and Germany’s “Kurzarbeitergeld” system of paid furloughs is credited with helping the economy snap back from the Great Recession faster than other European nations. But such ideas have little traction in the current political environment.

“The best thing to do would be giving direct payroll subsidies [and] wage supplements to employers,” said Volk, the cocktail bar owner in Maine. “Keeping that connection between small businesses and their employees is incredibly valuable.”

Zachary Warmbrodt and Rebecca Rainey contributed to this report.

This article was originally published by Politico on April 20, 2020. Reprinted with permission. 

About the Author: Ian Kullgren is a reporter on POLITICO’s employment and immigration team. Before joining POLITICO, he was a reporter for The Oregonian in Portland, Ore. and was part of a team that covered a 41-day standoff with armed militants at the Malheur National Wildlife Refuge. Their efforts earned the Associated Press Media Editors grand prize for news reporting in 2017. His real beat was politics, though, and he spent most his time at the state capitol covering the governor and state legislature.


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