April 23, 2020

Insured Unemployment Rates Chart Progress in Reopening States’ Economies

Dave Shideler and Jonas Crews

In addition to our analysis on initial and cumulative unemployment insurance claims by state, we introduce analysis on insured unemployment rates by state to better monitor responses to states that are reopening their economies.





Initial Claims for the Week Ending April 18, 2020

Initial unemployment insurance (UI) claims increased for the fifth consecutive week, but at a slightly slower pace, for the week ending April 18, 2020. Only 4.4 million applied for unemployment insurance last week. Fewer initial UI claims two weeks in a row could suggest that layoffs and furloughs may have peaked. States continue to experience difficulties with processing initial claim applications as well as distributing unemployment insurance benefits, which partially explains the high numbers released today. Spending induced by the Payroll Protection Program (PPP), Economic Injury Disaster Loans (EIDL), and direct payments to households (per the CARES Act) could be contributing to the decline by keeping people employed. As the nation begins to pivot toward recovery from the pandemic, we believe shifting focus from initial claims to insured unemployment rates to better track the recovery is appropriate.

Reopening Economies and Insured Unemployment Rates

On April 16, the Trump administration released its ‘gating criteria’ to reopen the economy as a guideline for state governments to follow. These criteria include observing a downward trajectory of symptoms and cases over a 14-day period, and hospitals have capacity to treat new, serious cases and are equipped to test at-risk workers.1 Aside from South Carolina and Georgia2, which have begun reopening selected business categories this week, states are putting plans in place for tracking these metrics and communicating policy adjustments for when the gating criteria are met.
To track states’ progress in reopening their economies, we use the insured unemployment rate, as presented in the chart below. The insured unemployment rate (IUR) is the ratio of the number of individuals receiving UI benefits (or continuing UI claims) to total employment covered by UI. While initial claims are a helpful leading indicator of layoffs and economic decline, continuing claims point to how the economy is absorbing (or not) those unemployed workers. Continuing claims is a net calculation from the previous week’s value: initial UI claims for the current week are added to the value, while those who find work or exhaust their benefits3 are subtracted from the value. So, IUR rises when initial claims exceed the numbers of individuals finding employment, as in our current situation. IUR will decline when the number of those finding employment exceeds initial claims, or as the economy recovers.



In the chart above, one can see that the IUR is trending up – suggesting that the economy is still in lock-down, and initial claims continue to rise. (Note, the IUR reflects activity from two weeks ago; while initial claims are estimated for the prior week, data about individuals no longer receiving UI for a given week is only available two weeks later.) So, we anticipate a further increase in IUR for April 18, given that 4.4 million people applied for UI last week. The Heartland region4 has lower IUR rates than the remaining 30 states and nation overall, which reflects the lower initial claims throughout the Heartland that we’ve reported on in previous weeks. Only Florida appears to have declining insured unemployment rates, suggesting that hiring may be occurring. Colorado, Georgia, Idaho, Louisiana, Kentucky, Ohio and Wisconsin have realized dramatic slowing in the rise of the insured unemployment rate, suggesting that they may be nearing a peak. (One can view IUR trends for one or more states by changing the selections in the drop-down menu labelled “Select Multiple States or State Groups”.)

We will be watching Georgia and South Carolina to see if their IUR trends begin declining when this week’s data is released on May 7. Georgia, for example, is allowing many personal services, bowling alleys, gyms to open on Friday, April 24, while some restaurants and movie theaters can open on Monday, April 27; South Carolina opened its beaches and most non-essential businesses on Monday.5 Arkansas6 and Oklahoma7 are also on our watch list, as the Governors in these states want to allow outpatient, elective surgeries as soon as possible, even before ‘gating criteria’ are met. The hope is that the economies in these states will open and continuing UI claims will decline.

Economic Impacts Driven by State’s Industrial Composition not COVID-19

The chart below shows the share of total employment by state that has filed for unemployment insurance since March 1; you can look at the weekly increases in this rate by the slider at the top of the chart. The pattern this chart reveals is that the economies with the greatest jobs lost are not those realizing the most significant numbers of COVID-19 cases. Instead, the states with the greatest share of jobs lost are those that rely heavily on manufacturing, retail and tourism-related industries. Hawaii has been hit hardest with almost 27% of its workforce filing for unemployment insurance because of its dependence on tourism. Kentucky ranks second, with 25 percent of its employment filing for unemployment insurance since March 1, largely because of its large manufacturing sector. Michigan ranks third, also with 25 percent of its workforce receiving UI benefits; as the home to American automotive manufacturing, this is not a surprise. Rhode Island may be a surprising fourth, until you realize that two of the three largest sectors are Accommodation and Food Services and Retail Trade; combined they comprise roughly 20 percent of the state’s employment. Another interesting observation is that Nevada, Pennsylvania and Rhode Island were the first three states to break 5 percent of workforce filing for UI the week ending March 21, and they remain among the top 6 states for initial UI claims through the most recent data, being joined and surpassed by Hawaii and Michigan with the week ending April 4 and Kentucky with the week ending April 18.



State Trends for Initial Claims

Until states do reopen their economies, the most current economic indicator is the initial unemployment insurance claims. The map below highlights the magnitude of initial claims for the week ending April 18, as well as the change from the previous week by state. With only a handful of states continuing to see increases in initial claims, there is mounting evidence that the worst of the layoffs/furloughs are past. However, delays and limitations associated with distributing government assistance may lead to additional joblessness as corporations struggle with COVID-19 consequences. Department stores and other retailers are restructuring debt or filing for bankruptcy due to the inability to pay for Spring inventories without sales8 (e.g, Neiman Marcus9, True Religion10), and oil and gas companies, often heavily leveraged firms, have their debt recalled by banks and face never-before low prices.11



States with increasing levels of initial claims last week were: Florida (324,718 claims; 180 percent increase over last week), Connecticut (68,707 claims; 202 percent increase over last week), West Virginia (31,307 claims; 209 percent increase over last week), Louisiana (12,386 claims; 16 percent increase over last week), Texas (6,149 claims; 2 percent increase over last week), Kansas (2,047 claims; 7 percent increase over last week) and Alaska (1,020 claims; 8 percent increase over last week). While four of these states (Florida, Connecticut, Louisiana and Texas) rank highly (among the top 11 states) for total confirmed COVID-19 cases, our analysis over the past several weeks is finding that unemployment claims are more closely tied to the industrial composition of state’s economy rather than COVID-19 cases. (See bar chart above.) The Heartland region continues to account for roughly one-third of initial unemployment claims filed, with 1.4 million initial claims filed last week. Those states seeing the greatest decline in initial claims last week were: New York, California, Michigan, Georgia and Washington. Those states with the greatest rate of decline, however, were: Missouri (48 percent decline), New York (48 percent decline), Wyoming (43 percent decline), Michigan (28 percent decline) and Washington (38 percent decline).

Planning for the Recovery

The CARES Act stimulus plan has had limited impact to date; with over $375 billion in loans to small businesses exhausted, direct payments to households delayed, and hospitals struggling to cover COVID-19 related expenses, a sense of anticipation and urgency for the recovery phase is emerging. The federal government will hopefully announce a fourth round of stimulus soon that would include over $300 million for the Payroll Protection Plan (PPP) program (which includes set asides for small lenders in an effort to get these stimulus dollars out to smaller and more isolated communities), $75 billion for healthcare providers and hospitals, and over $30 billion for increasing access to testing and contract tracing.

While state and local governments face revenue shortfalls and unanticipated expenses due to the pandemic, they can and should act within their means and context. Heartland Forward’s Senior Fellow Richard Florida advocates12 the following:

• preparedness to open civic assets such as airports, stadiums, convention centers, transportation systems, etc. which could include securing masks and investments in temperature monitoring equipment, and having guidelines for new operating procedures to ensure the public’s health

• rethink your community’s infrastructure, using this crisis to bring about needed changes in transportation and communication networks (e.g., making downtown more pedestrian-friendly); investing in infrastructure now can help boost your community’s recovery

• modernize your economic development strategies by focusing on existing businesses and industries, supporting small and emerging businesses, and empowering your workforce with new tools (such as protective equipment) and better wages and benefits.

Endnotes

  1. https://www.newsweek.com/trump-releases-plan-reopen-states-says-america-next-front-war-coronavirus-1498423

  2. https://www.kff.org/health-costs/issue-brief/state-data-and-policy-actions-to-address-coronavirus/

  3. Since the CARES Act extended eligibility for 13 weeks beyond a state’s ordinary limit, we can safely assume that decreases in UI continuing claims is due to hiring through the middle of June – 13 weeks from when the CARES Act was signed into law.

  4. The Heartland region includes the following states: Alabama, Arkansas, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Michigan, Minnesota, Missouri, Mississippi, Nebraska, North Dakota, Ohio, Oklahoma, South Dakota, Tennessee, Texas and Wisconsin.

  5. https://www.barrons.com/articles/coronavirus-live-updates-oil-tanks-as-congress-and-mnuchin-near-a-500-billion-aid-deal-51587390703

  6. https://talkbusiness.net/2020/04/gov-hutchinson-sets-may-4-as-target-date-to-begin-reopening-state-economy-updated/

  7. https://www.swoknews.com/news/stitt-to-develop-plants-for-reopening-parts-of-economy/article_7d29cc9f-6173-5e98-b398-79d8d45b0bf1.html

  8. https://www.wsj.com/articles/whats-in-the-new-coronavirus-stimulus-bill-11587511763

  9. https://www.nytimes.com/2020/04/21/business/coronavirus-department-stores-neiman-marcus.html?auth=login-email&login=email

  10. https://www.latimes.com/business/story/2020-04-13/true-religion-files-for-bankruptcy-again-as-denims-allure-fades

  11. https://www.houstonpublicmedia.org/articles/news/business/2020/04/20/367254/covid-19-shutdown-oil-price-crash-set-to-trigger-wave-of-bankruptcies/

  12. https://www.brookings.edu/blog/the-avenue/2020/03/24/how-our-cities-can-reopen-after-the-covid-19-pandemic/