April 30, 2020

Unemployment Continues to Rise, Recovery Seems Elusive

Dave Shideler and Jonas Crews

Initial unemployment claims continue to rise, though at a slower rate for the 3rd week in a row. Enhanced unemployment benefits pose a challenge to reopening the economy.





Initial Claims for the Week Ending April 25, 2020

Initial unemployment insurance (UI) claims increased for the sixth consecutive week, but at a slightly slower pace, for the week ending April 25, 2020. Only 3.8 million applied for unemployment insurance last week. Fewer initial UI claims three weeks in a row suggest that layoffs and furloughs may have peaked. The initial UI claims do not include workers in states reopening their economies this week, and it remains to be seen whether the public feel safe enough to emerge from quarantine1 and public health officials fear a second spike in COVID-19 cases.2

States continue to experience difficulties with processing initial claim applications as well as distributing unemployment insurance benefits3, which partially explains the high numbers released today. Spending induced by the federal stimulus packages is having a limited impact with the vast majority of the economy shutdown, and some firms face difficult decisions about recalling employees who receive more income from enhanced unemployment benefits than they would earn working; other employees are simply refusing to return to work.4

Reopening Economies and Insured Unemployment Rates

As expected, the insured unemployment rates (IUR) rose to 12 percent across the U.S. and 11 percent in the Heartland. This data reflects the number of individuals receiving unemployment insurance benefits as of April 18, well before any states allowed non-essential businesses to reopen.



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). The Heartland region5 has lower IUR rates than the remaining 30 states and the nation overall, which reflects the lower initial claims throughout the Heartland that we’ve reported on in previous weeks. Alabama, California, Hawaii, Michigan, Mississippi, and Pennsylvania appear to have declining insured unemployment rates, suggesting that hiring may be occurring. Numerous states have realized a 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 labeled “Select Multiple States or State Groups”).

This week, several states took steps toward reopening their economies. Georgia, for example, allowed many personal services, bowling alleys, gyms to open on Friday, April 24, while South Carolina opened its beaches and most non-essential businesses on Monday, April 20.6 Texas plans to reopen movie theaters, restaurants and malls at 25 percent of capacity on Friday, May 1.7 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 highest share of jobs lost are those that rely heavily on manufacturing, retail and tourism-related industries. Hawaii continues to be the hardest hit with over 30% of its workforce filing for unemployment insurance because of its dependence on tourism. Kentucky ranks second, with 29.9 percent of its employment filing for unemployment insurance since March 1, primarily because of its large manufacturing sector. Georgia ranks third, with 27.6 percent of its workforce receiving UI benefits, while Rhode Island is fourth at 27.4 percent. Michigan rounds out the top 5, with 26.7 percent of its workforce receiving UI benefits. 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. Pennsylvania now ranks 6th and Nevada is 7th.



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 25, as well as the change from the previous week by state. Only 7 states saw a rise in initial unemployment claims, so 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.



States with increasing levels of initial claims last week were: Washington (62,300 claims; 75 percent), Georgia (17,800 claims; 7.2 percent), New York (13,700 claims; 6.7 percent), Oregon (9,500 claims; 26 percent), Nevada (5,500 claims; 14 percent), Iowa (1,900 claims; 7.2 percent), South Dakota (94 claims; 1.8 percent) and New Mexico (91 claims; 0.7 percent). Only Georgia, New York and Washington, confirming our analysis over the past several weeks that unemployment claims are more closely tied to the industrial composition of a state’s economy rather than COVID-19 cases. (See bar chart above.) The Heartland region continues to account for roughly one-third of the initial unemployment claims filed, with 1 million initial claims filed last week. Those states seeing the most significant decline in initial claims last week were: California (200,300 claims), Florida (74,200 claims), Connecticut (69,700 claims), New Jersey (69,100 claims), and Pennsylvania (63,300 claims). Those states with the greatest rate of decline, however, were: Connecticut (68 percent decline), New Jersey (49 percent decline), Colorado (43 percent decline), Montana (41 percent decline), and Michigan (41 percent decline).

Endnotes

  1. Lynch, David J. & Bhattarai, Abha. (2020, April 28). “Push to reopen economy runs up against workers and consumers worried about risk.” The Washington Post. https://www.washingtonpost.com/business/2020/04/28/trump-coronavirus-economy-reopen-meat/

  2. Williams, Michelle A. & Koff, Wayne C. (2020, April 27). “How the U.S. should invest in public health before reopening the economy.” Fortune. https://fortune.com/2020/04/27/coronavirus-public-health-investment/

  3. Chaney, Sarah & King, Kate. (2020, April 30). “States Struggle With Coronavirus Unemployment Claims Surge.” The Wall Street Journal. https://www.wsj.com/articles/states-struggle-with-coronavirus-unemployment-claims-surge-11588239004

  4. Morath, Eric. (2020, April 28). “Coronavirus Relief Often Pays Workers More Than Work.” The Wall Street Journal. https://www.wsj.com/articles/coronavirus-relief-often-pays-workers-more-than-work-11588066200?mod=searchresults&page=1&pos=1

  5. 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.

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

  7. Platoff, Emma. (2020, April 29). “States Struggle With Coronavirus Unemployment Claims Surge.” The Texas Tribune. https://www.texastribune.org/2020/04/29/texas-greg-abbott-economy-coronavirus/