Initial claims for the week of December 26 were largely unchanged in California, while dropping sharply in the rest of the US.

In California, initial claims in the regular program were up 5.6% over the prior week, with those gains largely offset by a 22.1% drop in initial PUA claims.  In the national totals, regular claims were down 3.6% and PUA claims down 22.3%.  Combined, total claims were down only 0.7% in California and 9.5% in the US.

With the trends once again beginning to diverge, the relative level of initial claims within the state is beginning to grow relative to the rest of the nation.

The most recent backlog reports from EDD again show relatively little progress in reducing the backlogs. The backlog in initial claims as of December 23 was up 14.3% from the week prior. The continuing claims backlog was down only 0.6%. Note that the current reports again change the reporting dates, with revisions to the data for the first two days of the subject week.  

Backlogged initial claims are defined as those “applications for benefits that take more than 21 days to issue a first payment or to disqualify the individual, regardless of if the claimant or EDD need to take some kind of action.” Backlogged continuing claims are defined as a “subset of all individuals who received at least one payment and are now waiting more than 21 days for further processing of payment or disqualification.”

During the pandemic period of the weeks ending March 7 through December 12, EDD reports paying out a total of $110 billion in benefits under the four unemployment insurance program categories.

The payments are funded by two sources:  employer contributions based on a per-employee tax and federal emergency funds for the expanded payment amounts and program categories.

When the state fund is exhausted, loans are automatically provided through the federal government to continue payments.  These loans are subsequently retired by increasing the tax rate on employers.  California employers are currently subject to the highest Schedule F rates plus an additional 15% surcharge previously used to retire the accumulated debt from the prior recession.  Rates currently range from 1.5% to 6.2% on the first $7,000 of taxable wages per employee.

The prior recession caused the fund to go negative until it stabilized into a positive balance only in March 2018.  In the current downturn, the accumulated balance was essentially exhausted in one month’s payments.  EDD’s most recent October projections indicate the fund will have a negative balance of $21.5 billion by the end of 2020, and $48.3 billion by the end of 2021.  Contributing to the projections are the expectations that employer contributions will decline substantially due to the current and expected continuing drop in employment.  EDD, however, notes that these projections are tentative and likely subject to change due to the shifting nature of the current crisis.

As discussed in the Center’s recent reports, unemployment in the current crisis has been heavily concentrated among lower wage workers in customer-contact jobs in Retail Trade and Leisure & Hospitality.  Employment levels in these industries is tracked in the monthly labor force numbers.  The Census Bureau has also recently introduced an experimental monthly retail sales report for the states that can also provide insights on the likely course of rehiring based on sales performance.  The data is presented as the change in sales compared to the same month in the prior year.

As expected, retail sales saw a deep dive throughout much of the pandemic period, with sales dropping considerably further in California than in the country as a whole.  September saw an upsurge in buying, an outcome that was likely reversed in the subsequent rounds of closings ordered by the state.  In the charts below, some of the monthly data for California is not reported due to data disclosure provisions.

These losses were not uniform across all stores, especially those able to maintain operations at least to some extent through internet sales and home deliveries.  As residents sheltered in place and shifted their spending patterns accordingly, sales increased in Food and Beverage Stores and Sporting Goods, Hobby, Book, and Music.

Sharper drops were seen in Gasoline Stations, Clothing, Health and Personal Care stores, General Merchandise, and Miscellaneous.

Although not included in the state retail sales numbers, some indication of sales activities in food services, accommodations, and nonstore retailers is provided through the taxable sales data from the Department of Tax and Fee Administration.  While the publishing schedule for this data has improved substantially, it is still 3 months behind the Census estimates.  As discussed in our November 12 report, taxable sales in the second quarter for Food Services and Drinking Places were down 47% from the same period in 2019, down 83% in Arts, Entertainment & Recreation, and virtually nonexistent at a drop of 92% in Accommodations.  In sharp contrast, taxable sales nearly tripled in nonstore retailers as consumers made a major shift to internet purchases—a shift that has significant implications to both jobs and local revenues coming from commercial property taxes as the state’s response to the current crisis accelerates trends already underway in the economy.