July 30, 2020

Unemployment Insurance Claims Back Up GDP Decline

Dave Shideler and Jonas Crews

The week ending July 25, 2020, was the 19th week during which over 1 million initial claims were filed. Consistent with the estimated 2nd quarter GDP decline of 32.9 percent, the US economy ails from the pandemic-induced recession.





Heartland Forward is tracking three key metrics on a weekly basis to understand how the current crisis is impacting the economies across different states: insured unemployment rate, initial unemployment insurance (UI) claims, and unemployment insurance cumulative claims. The week ending July 25, 2020, was the 19th week during which over 1 million initial claims were filed. Consistent with the estimated 2nd quarter GDP decline of 32.9 percent, the US economy ails from the pandemic-induced recession.

Insured Unemployment Rate (IUR)



Observations:

  • IUR for the Heartland region1 declined, though the U.S. non-Heartland regions saw IUR increase for the week ending July 18. Twenty-eight states had declining IUR, while 22 states had increasing IUR. Decreasing trends are consistent with the reopening of economies across the country.

  • The states with more than 1 in 7 participants in the workforce on UI are: Nevada (25.5 percent), Hawaii (21.1 percent), California (18.2 percent), Louisiana (16.6 percent), New York (16.4 percent), Connecticut (15.3 percent) and Georgia (14.6 percent).

  • The five states with the lowest IUR are: Idaho (3.4 percent), South Dakota (3.7 percent), Utah (4.5 percent), Alabama (4.6 percent) and Nebraska (4.7 percent).

  • UI Cumulative Claims



    Observations:

  • States with the largest shares of their workforce seeking UI benefits have large manufacturing, retail trade, and accommodations and food service (largely driven by tourism activities) industries.

  • Georgia continues to lead the U.S. with the highest share of its workforce applying for UI benefits at 66 percent.

  • Eighteen states have larger shares of their workforce applying for UI benefits than the U.S. (31.7 percent).

  • Seven states in the Heartland have larger shares of their workforce applying for UI benefits than the region (28.6 percent).

  • UI Initial Claims



    Observations:

  • Nationally, 1.43 million persons (seasonally adjusted)2 or 1.21 million persons (not seasonally adjusted) applied for UI for the week ended July 25, 2020.

  • The high level of demand for unemployment insurance claims is at least partially explained by the unusually high benefits being paid to qualifying workers. Most states’ unemployment insurance programs only pay a fraction of the wages a worker earns during a typical week, and, under normal circumstances, this amount may not have been worthwhile to seek by the unemployed worker. However, the federal government offered enhanced benefits of $600 per week to all workers receiving unemployment insurance, sometimes leading to higher pay for workers on unemployment than they would have received working.

  • These states had the highest number of initial claims for the week ending July 25, 2020: California (249,007), Florida (87,062), New York (85,000), Georgia (84,581) and Texas (76,109).

  • Nine states had more claims last week than the previous week. The 5 states with the highest increase in claims were: Virginia (8,578), Nevada (6,125), Indiana (2,698), Missouri (1,925) and Kansas (1,502).

  • These states realized the greatest decline in initial claims between last week and the week before: Wyoming (88 percent decline), Louisiana (45 percent decline), North Dakota (31 percent decline), Georgia (31 percent decline) and Maryland (31 percent decline).

  • Of the Heartland states, Texas, Illinois, Ohio, Wisconsin and Michigan had the highest levels of initial claims. Three Heartland states saw initial claims rise, with Indiana seeing the highest increase; Louisiana realized the greatest decline in claims, followed by North Dakota, Alabama, Mississippi and Tennessee.

  • More On Key Terms And Our Methodology

    Unemployment Insurance And Initial Unemployment Insurance Claims
    Unemployment insurance (UI) is a state administered program that provides a fraction of an individual’s prior wages when they are separated from an employer for reasons beyond the individual’s control. The fraction of wages paid, as well as the length of time an individual can receive benefits, vary by state, however, the Coronavirus Aid, Relief and Economic Security (CARES) Act provided expanded eligibility and enhanced benefits across all 50 states.3

    Weekly unemployment insurance claims data4 provides the most up-to-date data on employment trends that is available. Economists watch these data as indicators of the economy’s health, as movements in unemployment insurance foreshadow periods of economic contraction or expansion.

    Unemployment Insurance Cumulative Claims
    Initial claims are filed when an individual is separated from his/her employer. Administratively, it is a request for benefit eligibility determination. That is, no benefits are issued based upon this claim; rather, an individual is deemed eligible to receive benefits, and the level of those benefits is determined by this claim. Initial claims are considered a leading indicator of economic activity, as initial claims rapidly rise when the economy is contracting and many people are furloughed and/or laid off.

    The map allows you to observe how the levels of UI initial claims by state and week since March 7, 2020. Shades of red reflect rising claims, while shades of green reflect declining claims. If you hover over a given state, you will be given the level claims for the current data, as well as the level and percent change over the previous week.

    To put the initial claims data into perspective, we calculate the share of February 2020 private employment that have filed initial claims to date. This measure compares the sum of weekly initial claims since March 7, 2020, to “pre-COVID-19” pandemic employment levels (total private employment for February 2020). Intuitively, this calculation represents the share of a state’s workforce requesting UI benefits.

    The bars in the chart are arranged alphabetically, because you can compare week to week changes by adjusting the slider above the chart. Hovering over a particular bar will reveal the share of pre-outbreak employment that has filed for UI, as well as the level of initial claims since March 7, 2020 and the level of employment in February 2020.

    Insured Unemployment Rate
    The insured unemployment rate (IUR) is the ratio of the number of continuing claims in a given week divided by the number of employees covered by UI during that quarter. Continuing claims are filed to receive benefits for a week of unemployment, so these represent individuals receiving UI benefits. Covered employees is a proxy for the local workforce, as it represents all employees (working and unemployed) that are eligible to receive UI benefits. Data for the IUR represents benefits received for the week before last, or July 18, 2020.

    The IUR is proxy for economic activity. An increasing trend indicates economic contraction, since more individuals are receiving UI benefits from week to week. A decreasing trend indicates economic expansion, indicating that people are finding jobs (or returning to their previous jobs) and no longer needing UI benefits.

    The user can customize the chart by selecting any or all of the states, including aggregate values for the Heartland and U.S. Hovering over a state’s line will provide the continuing claims, covered employment and IUR corresponding to the week and region nearest the cursor.

    Endnotes

    1. The Heartland region consists of these states: Alabama, Arkansas, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Michigan, Minnesota, Mississippi, Missouri, Nebraska, North Dakota, Ohio, Oklahoma, South Dakota, Tennessee, Texas and Wisconsin.

    2. Seasonal adjustment is a technique used to remove labor market changes that correspond to changes in seasons, providing consistent data for comparison throughout the year. For example, one can anticipate a rise in summer employment as amusement parks or tourism venues increase employment between Memorial Day and Labor Day to accommodate the demand associated with the summer vacation travel season. This increase happens annually, so it would be inappropriate to interpret it as an increase in employment without accounting for the seasonality.

    3. Eligibility was expanded to cover individuals who are quarantined, caring for a family member with COVID-19, or who are voluntarily quarantining arising from health concerns. Additionally, independent contractors and sole proprietors are eligible for unemployment insurance benefits under the Pandemic Unemployment Assistance. Enhanced benefits included a $600 per week supplement to state’s regular payments through July 31, 2020, and an extension of every state’s benefits duration by 13 weeks.

    4. Unemployment insurance claims is reported weekly, 8:30 am Eastern Time on Thursdays, by the U.S. Department of Labor, Employment and Training Administration here: https://www.dol.gov/ui/data.pdf. Historical data is available for download here: https://oui.doleta.gov/unemploy/claims.asp.