As the data begins to fully reflect the state’s full reopening on June 15, total initial claims in California the week of July 3 climbed back to levels previously seen the last three weeks of April.

In California, initial claims processed in the regular program rose 5.3% compared to the prior week, while PUA claims soared just short of a third at 32.2%. In the national totals, regular claims were up only 0.9%, while PUA claims dropped 13.3%. Combined, total claims processed rose 13.9% in California while dropping 2.5% in the US numbers. The US total again remained below 500,000 barrier and was at its second lowest level since the PUA program began in May 2020.

The US totals returned to a longer-term decline trend, while the California results suggest a potential turn away from the previous stabilization in the numbers.

As discussed in more detail in our latest Job Report on the May results, most states are now shifting policies in response to growing concerns that the unprecedented federal enhancements to unemployment insurance payments are a key factor in the worker shortages that threaten to hold back the speed and extent of the economic recovery. Yesterday’s release of the Jobs Opening & Labor Turnover Survey (JOLTS) reported a record level of nonfarm job openings for the third month in a row in May, with the seasonally adjusted number at 9.2 million and the unadjusted number at 9.5 million. In spite of rising wage levels including a number of employers who are turning to signing bonuses, continued labor shortages have kept these jobs unfilled, holding back the pace of the economic recovery.

Various states have taken different approaches to this issue, and can be categorized within one of three groups:

• Early Action States: 26 states have announced an early end to some or all of the federal enhancements, retaining the core state benefit structures as part of their ongoing safety net programs. These states generally have reinstituted the previous job search requirements as well. These changes started going into effect on June 12 in 3 states, with most of the others following by June 27. Lawsuits have been filed challenging these actions in at least 4 states.
   
• Job Search States: 10 states have announced that only the previous job search requirements will be resumed in order for recipients to maintain benefits. In addition to California whose reinstatement will go into place July 11, these states are: Connecticut (which also is instituting a $1,000 “signing” bonus for workers returning to jobs), Kansas, Kentucky, Maine, Massachusetts, Michigan, New Mexico, Pennsylvania, Vermont, and Virginia. These requirements have already gone into effect in 8 of the 10 states.
   
• No Change States: The remaining 14 states and DC have not announced any related policies to accelerate the return to work.

Taking the week of June 12—when the first changes under the Early Action states went into effect—as the comparison base, the Early Action states combined have seen a 16.5% drop in the number of initial claims. California in this period saw an 8.2% increase in spite of eliminating the previous county tier restrictions on June 15. The other Job Search states—where these provisions largely were already in effect—saw a 7.7% drop, roughly comparable to the 7.8% drop in the No Change states. The No Change state number, however, continues to reflect changes in Illinois to combat widespread fraud in its system. Putting the Illinois numbers to one side, this group instead experienced a 6.4% growth, closer to the results from California.

The most current EDD backlog data shows claims awaiting EDD action eased 2.3% the week of July 3. Incorporating significant revisions to the number of claims pending claimant action in the prior two weeks, total EDD backlogs, however, increased 8.1% and kept the total above the one million mark. The backlog has remained above the one million mark. Backlogged claims are defined as those awaiting action for 21 days or longer.

EDD has not yet posted the call center data for the week of July 3.

In the most recent data from the EDD, California paid out a total of $155.0 billion in benefits under all the UI programs since the week of March 7, 2020 and through the week of June 26, 2021. The most current estimate from EDD 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. Individual cases of alleged fraud continue to unfold.

The most recent data from the US Department of Labor indicates California’s outstanding loans as of July 26 from the Federal Unemployment Account rose to $22.3 billion. The most recent projections from EDD expect the total to reach $24.3 billion by the end of the year and $26.7 billion by the end of 2022, but the current results for the 2nd quarter of 2021 already exceed the EDD projections by about $2 billion. This amount is far 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 by both the state and federal governments.

The number of states with a federal fund debt shrank to 17 (plus Virgin Islands) as New Mexico—a Job Search state—exited the list. California accounted for 41% of the new total.