Recent trends continued for the week of May 8, with the number of total initial claims essentially level in California while continuing to drop in the rest of the US.

In California, initial claims processed in the regular program dipped 0.5% compared to the prior week, while PUA claims rose 7.0%. In the national totals, regular claims were down 5.1%, while PUA claims edged up 1.7%. Combined, total claims processed were up 1.0% in California and fell 4.0% in the US numbers.

By industry, the pattern was little changed with the largest number of initial claims (all programs) again filed by workers in Accommodation & Food Service (16.9%), Retail Trade (11.6%), Health Care & Social Assistance (9.8%), Administrative & Support & Waste Management Services (8.6%), and Construction (7.7%).

The California numbers now have been essentially level for the past 5 weeks. Total initial claims in the other states have been on a downward trend over the past 6 weeks.

In the most recent results for March, California tied with Connecticut and New Mexico for the third highest unemployment rate in the country, behind only Hawaii which is even more dependent on tourism-related employment and New York which adopted lock-down strategies comparable to California's.

These numbers only cover the officially unemployed and not workers who have left the labor force during the pandemic period including workers who have given up on trying to find a job, workers who are fearful of contracting the disease if they get a job, and parents who had to quit their jobs to take care of their children while the California public schools have remained closed and while substantial uncertainty remains in many districts over when and how they will reopen.

The most recent tier allocations for the week of May 11 from the Department of Public Health show continuing improvements in relieving restrictions to business activities and jobs. Counties in the second-lowest Tier 3 restrictions held 50.5% of March's unemployment, 10.1% remain within the second-highest Tier 2, but the lowest Tier 4 rose to 39.3%. All counties remain under some level of restrictions which present barriers to the state's economic recovery and continued reliance of many workers on unemployment benefits, although the governor recently announced his intention to remove the tiered system by June 15.

In the most recent data from the Centers for Disease Control, California again was just above the US average in the share of vaccine doses being administered. Total additional vaccine supplies rose to 2.5 million for the week (15.8% of the national gain), and the number of shots grew to 2.1 million (14.0% of the national total). As of midday May 13, a total of 33.8 million shots have been administered in the state covering 20.5 million people, or 52.0% of the population and 65.6% of the population age 18 and over. In all, 36.2% of the population (US 35.4%) and 46.0% of population 18 and over (US 45.1%) have been fully vaccinated.

The most current EDD backlog data indicates total backlogged claims rose again, up 2.2% the week of May 8, with the total still exceeding 1 million. The number of claims backlogged awaiting EDD action rose 17.7% over the prior week, and 77.7% compared to the low reached the week of April 10. Backlogged claims are defined as those awaiting action for 21 days or longer.

The related call center data indicates that the number of calls was largely unchanged from the prior week, but the number of calls answered continued to drop for the third week in a row. On average—using total number of calls received and the number of calls answered by staff—the average caller put in 12.6 calls trying to reach EDD. Of the unique callers, up to 69% had their calls answered by staff (assuming one call answered per unique caller).

While the overall claims backlog remains largely due to applications awaiting claimant action, the extreme difficulty in reaching EDD for clarifications—as indicated by the call data—more accurately likely puts a substantial portion instead under the “pending EDD” category.

As an indicator of long-term unemployment in the state, payments for the extended benefit programs (PEUC and Fed Ed) dipped to 28.5% of the total for the week of May 8. While the share has eased from its high of 50.3% in March, the overall trend indicates a substantial share of those receiving unemployment benefits still face the risks of lifetime wage and income effects similar to those that afflicted the long-term unemployed coming out of the previous recession that began in 2008.

Extended unemployment also appears to be having an effect on the pace of the economic recovery. The disappointing economic data released over the past week on the national level again highlights the difficulty many employers have expressed in being able to hire workers as the economy reopens. Even at a time of high unemployment, the most recent, April edition of the Federal Reserve’s Beige Book contains at least 23 references to “labor shortages” or other terms related to the difficulty many businesses have experienced in hiring workers in spite of rising wages, and the potential consequences to further supply shortages leading to higher prices and delays to overall economic recovery.

In California, the potential scope of this issue is illustrated by the state’s continuing high share of workers who are unemployed and those who have left the labor force and are no longer looking for work. Based on the March numbers (seasonally adjusted), California—with 11.9% of the civilian population age 16 and over—contained 16.1% of the nation’s workers officially counted as unemployed. Using the pre-pandemic February 2020 numbers as the base for comparison, California accounted for 14.5% of workers who are officially counted as unemployed or left the workforce, although this share would be higher still if also adjusted for California’s significantly lower labor force participation rate prior to the pandemic. As discussed above, unemployment claims activity has changed little in recent weeks, while showing a sustained decline in the rest of the country. Also from the March numbers as indicated above, California tied with Connecticut and New Mexico for the third highest unemployment rate in the country.

There are likely several reasons why workers are choosing not to take jobs at this time, including:

• Many remain concerned about becoming sick if they return to work. This is an issue that likely can only be resolved with time, but probably remains heightened in California due to the state’s continuously shifting treatment of work and work restrictions over the pandemic period and the continuing lack of a consistent and transparent set of criteria on which these decisions have been made. Uncertainty breeds concern.
   
• Continued uncertainty over when, how, and even still in some cases if the public schools will return to full time classroom teaching severely hinders the ability of many parents, especially lower income mothers, to return to a job. This is not an issue affecting parents with children in many private schools and even some charter public schools, but delays on resolving the issues continuing to be raised by the unions in the noncharter public schools makes this issue of more relevance to California. As discussed in last week’s report, the latest survey from the National Center for Education Statistics places California dead last among the reporting states in the share of students being offered in-person instruction (offered to all students), at only 5% compared to a US average of 50% and several states near or above 90%.
   
• Enhanced federal unemployment benefits have made it possible for some workers to earn near or even more money on unemployment than by working, particularly when adding in additional factors such as FICA and other payroll deductions, tax exemptions for a portion of the benefits, variations in weekly hours worked, and the avoidance of work-related expenses such as commuting and dependent care. While debates continue over how significant this factor is, the numbers indicate it can be a direct factor for some workers and, by adding a measure of economic feasibility, likely increases the number of workers choosing to forego jobs at this time due to the previous two reasons. At least 15 states, generally with substantially lower unemployment rates than California, have already announced an early end to the enhanced federal benefit payments. Even President Biden has acknowledged the likelihood of this issue by recently encouraging states to reimpose work search requirements as a condition of receiving benefits, which some had previously done.

The national employment and job numbers released last week intensified the debate by coming in well below projections, with the comparable numbers for California scheduled to be released at the end of next week. More importantly, the latest JOLTS (Job Openings & Labor Turnover Survey) data also released this week shows job openings reaching a new high, while the number of workers taking jobs has little changed. In the latest March data, the number of unfilled job postings were at a series high of 8.1 million, while the number of jobs filled by hires was basically at pre-pandemic levels at 6.0 million. More importantly, the gap between openings and hires was also at a series high of 2.1 million. Voluntary quits—generally considered an indication that workers have already found or comfortable they will find a job at higher pay or benefits—also was back to pre-pandemic levels. Involuntary separations (layoffs and discharges) similarly were at a series low, indicating businesses were doing what they had to do to keep more of their current workers.

In other words, overall, the jobs were there to substantially surpass expectations for the March job and employment numbers, but the workers to take them weren’t.

Comparable estimates for California lag the US numbers by about a quarter, but generally show a similar pattern through the end of 2020 with the exception that all three measures dropped off at the end of the year as the state reimposed stay-at-home orders.

While the BLS estimates for California lag the national numbers, various other mega data sources provide insights that are more current. For example, data from Opportunity Insight shows California job postings rebounding in the first quarter similar to the upsurge in the US numbers.

The debate at the national level has tended to focus on whether the substantially enhanced unemployment benefits are causing workers to forego job opportunities or not. It has not focused on why this would be important:

• The state has emphasized reducing inequality as a core principle that should be addressed in the pending economic recovery, and has shaped many of its policies and budget proposals from this perspective. Yet, the state’s actions during the pandemic have had the greatest economic effects on lower wage workers, both those previously working in the tourism and services industries with the greatest number of closures due to the state restrictions and parents having to quit jobs to care for their children while the schools have remained closed. To the extent current benefit programs produce yet another economic barrier, inequality among this previously hardest-hit portion of the population will become worse.
   
• The current benefit structures deal with immediate problems. Long-term unemployment has economic effects that are longer lasting and more pernicious by affecting employability and life-long wage and income potential. The focus instead should be on restoring workers to jobs as quickly and as safely as possible in order to minimize the totality of potential economic harm to workers from the current conditions.
   
• Even prior to the pandemic, there were already strong trends underway affecting the potential types, numbers, and wage levels of jobs in the future state economy. In several respects, the pandemic actions by the state accelerated these including a shift to automation, deliveries, and other alternative sales channels that in particular affect lower wage jobs in the state. To the extent labor shortages are real and persist for these businesses, the shift to labor replacement investments will be further strengthened and fewer jobs overall will be there to restore for these workers and skill levels.
   
• Shortages produced by uneven recovery within the economy are already producing cascading effects into related industries and combined, in overall price inflation. Measured by the CPI-All Urban Consumers as a moving 12-month change, inflation nationally in April surged to its highest level (4.2%) since 2008. For the state, a California CPI is calculated by Department of Finance as a weighted average using reported data for, currently, 4 MSAs. The chart below includes both the results as calculated by Finance through 2020 plus updates for 2021 based on their formula. The full data for April is not yet available, but inflation overall for the state has been tracking closely to the US numbers in recent months, compared to the wider divergence experienced beginning in 2015. While rising costs in California affect everyone, the effect is particularly deleterious to lower income households as the rising costs of living have continued to swamp potential income gains many have been able to achieve through wage increases.

In the most recent data from the EDD, California paid out a total of $143.4 billion in benefits under all the UI programs since the week of March 7, 2020.

The most current estimate is that up to $31 billion of unemployment benefits was paid out to fraudulent claims, consisting of $11 billion in known fraud and up to $20 billion in suspected fraud.

The most recent data from the US Department of Labor indicates California’s outstanding loans as of May 11 from the Federal Unemployment Account eased to $20.1 billion, or 39% of the total amount owed by 18 states (down 1) and 1 territory.