March 19, 2020

Unemployment Claims Predict Future Economic Impacts of COVID-19

Dave Shideler and Jonas Crews

Recent federal changes to the unemployment insurance (UI) program authorized employee eligibility under certain conditions related to COVID-19


Recent federal changes to the unemployment insurance (UI) program authorized employee eligibility under certain conditions related to COVID-19:

1. An employer temporarily ceases operations due to COVID-19, preventing employees from coming to work;

2. An individual is quarantined with the expectation of returning to work after the quarantine is completed; and

3. An individual leaves employment due to a risk of exposure or infection or to care for a family member.

Additionally, an employee does not have to resign or quit in order to receive unemployment insurance benefits due to COVID-19.1

This map compares the change in initial unemployment insurance claims filed during the weeks ending on March 7 and March 14, 2020, the period just before states of emergency were declared by the President of the United States and most state governors. Not surprisingly, Nevada and Washington states have the highest increase in claims, given Nevada’s heavy dependence on tourism and Washington is the location of the U.S.’ largest outbreak initially. Alabama, Arkansas, and West Virginia, which were among the last states to confirm a coronavirus case, actually saw sizable decreases in initial claims; their trends are expected to reverse in the coming weeks. At the national level, initial claims for unemployment insurance jumped by 70,000 this week, the highest one week jump since Hurricane Harvey in 2017.2 Reports from officials in several states indicate that the next weekly jump could be even larger.3 The rise in UI claims is anticipated due to the spread of infection, as well as social distancing measures instituted that include the closure of restaurants, bars and many venues where individuals gather.

Initial claims for unemployment insurance, the number of individuals applying for unemployment insurance, foretell the status of a state’s economy in the coming weeks or months. Because eligibility requires that someone is unemployed through no fault of their own, raising claim numbers to indicate layoffs in the economy. As initial claims rise, economic activity slows and recession becomes more likely.

Reported weekly, these data are the closest to real-time data on employment conditions across states the federal government provides. For this reason, economists consider initial claims for unemployment insurance a ‘leading indicator.’ States also have the ability to adjust eligibility requirements, and states have made it easier to access this program by those affected by COVID-19. Ohio, for example, waived the waiting period to receive unemployment benefits, employers will not face penalties for late reporting or payments, extended eligibility to include those quarantined by a physician or their employer (ahead of the federal government), and waived self-reporting requirements for those already receiving unemployment insurance benefits.4 It is common for states to make this program more accessible in economic downturns, as it can be implemented quickly while additional aid or policies are negotiated and implemented.

Eligibility varies by state, though all workers must have become unemployed through no fault of their own, usually due to a lack of unavailable work. Additional requirements include a minimum time worked or wages earned during a ‘base period’ (commonly defined as the first four of the last five completed calendar quarters before a claim is filed). Claims are filed through each state’s unemployment insurance program, and it typically takes 2-3 weeks for a claim to be approved and the first benefit check received. More information on the unemployment insurance program and links to state contacts can be found here: https://www.dol.gov/general/topic/unemployment-insurance

Endnotes

  1. US Department of Labor. “How Do I File for Unemployment Insurance?” https://www.dol.gov/general/topic/unemployment-insurance

  2. Crutsinger, Martin. (2020, March 19). “Jobless Claims Jump by 70,000 as Virus Starts to Take Hold.” Associated Press News. https://apnews.com/08b3cacd9fa24771a8c352356494a20d

  3. Rainey, Rebecca. (2020, March 17). “Coronavirus Layoffs Surge Across America, Overwhelming Unemployment Offices.” Politico. https://www.politico.com/news/2020/03/17/coronavirus-layoffs-america-unemployment-134819

  4. Breaking News Staff. (2020, March 16). “Coronavirus in Ohio: Who Qualifies for Unemployment, How to Apply.” WHIO TV7. https://www.whio.com/news/local/coronavirus-ohio-who-qualifies-for-unemployment-how-apply/wHwafFvnclCEH2ypS4CpXM/