Recent trends continued for the week of May 22, with the number of total initial claims down slightly in California while continuing to drop more strongly since the week of February 27 in the rest of the US.

In California, initial claims processed in the regular program edged up 2.1% compared to the prior week, while PUA claims dropped by 19.5%. In the national totals, regular claims dropped 7.5%, while PUA claims dipped 1.7%. Combined, total claims processed were down 2.1% in California 6.5% 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 (16.1%), Retail Trade (11.9%), Health Care & Social Assistance (10.3%), Administrative & Support & Waste Management Services (8.7%), and Construction (6.7%).

The California numbers now have been essentially level for the past 7 weeks. The overall trend for total initial claims in the other states has been a decline over the past 12 weeks.

In the most recent results for April, California had the second-highest unemployment rate in the country, only 0.2 percentage point behind Hawaii which is even more dependent on tourism-related employment.

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 22 from the Department of Public Health show only minor shifts in the tier allocations. Counties in the second-lowest Tier 3 restrictions held 40.8% of April’s unemployed, 8.3% still remain within the second-highest Tier 2, and the lowest Tier 4 edged up to 50.9%. 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 rose just above the US average in the share of vaccine doses being administered. As of midday May 28, a total of 37.9 million shots have been administered in the state covering 22.4 million people, or 56.2% of the population and 65.9% of the population age 12 and over. In all, 42.5% of the population (US 40.2%) and 49.9% of population 12 and over (US 47.7%) have been fully vaccinated.

The EDD backlogs continued rising the week of May 22. The most current EDD backlog data shows claims awaiting EDD action rose 13.6%, while the total backlog number was up 2.7%. The backlog has remained above the one million mark for 10 weeks running. Backlogged claims are defined as those awaiting action for 21 days or longer.

The related call center data indicates mixed improvement as the result of a sharp drop in the number of calls. Calls dropped 22.8%, but the number answered also dropped (-9.1%) for the 5th week in row. On average—using total number of calls received and the number of calls answered by staff—the average caller put in 12.1 calls trying to reach EDD. Of the unique callers, up to 72% 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) dropped to 25.4% of the total for the week of May 22. 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.

In the most recent data from the EDD, California paid out a total of $146.6 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 26 from the Federal Unemployment Account rose to $20.8 billion. The most recent projections from EDD contained in the May Revise expect the total to reach $24.3 billion by the end of the year. This amount is more than twice the peak of about $11 billion reached during the previous recession that began in 2008. That debt took 10 years to pay off through higher employment taxes imposed on businesses. The May Revise proposes using only $1.1 billion ARPA funds to offset the current debt. Combined with rising minimum wage (along with associated effects through wage compaction) that will exhaust the state fund faster in future economic downturns, the remaining amount in the debt after this level of proposed payment means the state fund will be unlikely to return to a positive balance prior to the next downturn. At the same time, businesses will continue to be burdened with higher employment taxes that will make it more costly to return workers to their jobs, offsetting other proposals within the May Revise to accelerate job returns. Recent LAO analysis indicates this debt could be paid down over the next 8-9 years, but only under their unemployment, inflation, debt amount (i.e., $20 billion current rather than EDD’s $24 billion projected), and economic cycle (i.e., no downturn in this period) assumptions and at a cost of $17 to $20 billion in higher taxes imposed on California employers and at a cost of keeping the state fund in a negative balance throughout this period.

Accounting for 40% of the total amount owed by 18 states and 1 territory, the size of this debt is an issue focused on California and at best a few other large states. At least eight states as of last summer had already used a portion of their federal relief funds to shore up their UI funds, while others such as Ohio are now proposing relatively broader use of the ARPA funds for this purpose.