Initial claims for the week of August 21 were little changed. The total continued rising slightly in California, while easing in the rest of the country.

In California, initial claims in the regular program rose 3.9% and PUA claims dipped 2.2%. For the US as a whole, regular program claims were down 3.8% and PUA claims rose 8.9% as the result of rising claims in Puerto Rico, Ohio, and a few other states. Total claims edged up 1.1% in California while easing 0.5% in the national numbers. Although at lower rates, total claims continued rising in California while the longer-term downward trend continued in the rest of the US.

As discussed in more detail in our Job Report on the May results, most states have shifted 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 while also contributing to inflationary pressures. These policy changes can be categorized within one of three groups:

• Early Action States: After accounting for changes as the result of court orders in two states, 24 states halted some or all of the federal benefit enhancements prior to the September expirations, retaining the core state benefit structures as part of their ongoing safety net programs. These states generally also have reinstituted the previous job search requirements as well, while Arizona, Montana, New Hampshire, and Oklahoma have also included a “signing bonus” for those returning to a job. Oklahoma also provides up to 60 days of free child care for returning workers.
   
• Job Search States: California and another 22 states resumed the previous job search requirements will be requirements in order for recipients to maintain benefits. Of these states, Colorado, Connecticut, and Virginia have also instituted “signing bonuses” for those returning to a job. California while technically in this category, has implemented job search requirements that are far broader than those in many other states.
• No Change States: Only four states have not announced any related policies to accelerate the return to work.

These distinctions will largely disappear after September 4, when the federal pandemic unemployment benefit enhancements expire. EDD, however, has indicated that they will continue processing some claims filed covering the eligible periods.

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 34.8% drop in the number of initial claims. California in this period has seen claims steadily rising, now at a 37.0% 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 27.8% drop. Putting aside Illinois, the No Change states saw a 4.9% rise. Illinois, the other No Change state, saw the deepest cuts overall at 41.2%, but this number stems from changes to combat widespread fraud in its system rather than the other policy options underway elsewhere.

Looking at the labor force side of the equation, the recent data for July released last week show the Early Action states much further along in recovering to the pre-pandemic numbers for both labor force (0.8% below) and employment (2.1% below) compared to California (labor force at 2.6% below and employment 5.9% below). While the early action on enhanced federal benefits is not the only factor leading to this disparity in recovery performance, it is an indicator of those states with broader policies accelerating the restoration of jobs and earned income vs. those that continue to emphasize public benefits.

Under their revised definition of the backlog, EDD now counts claims awaiting EDD action for more than 21 days plus claimants who are with the 30-day period to certify their eligibility for benefits. In the results for the week of August 14, the first component dropped 6.1%. The combined total was down 4.1%.

In the related call center data, overall activity continued to drop, with the number of calls down 15.5% to 2.2 million but the number of answered calls rising marginally by 1.3%. While improving, it still required an average of 9.1 calls to reach the EDD.

In the most recent data from the EDD, California paid out a total of $167.1 billion in benefits under all the UI programs since the week of March 7, 2020 and through the week of August 14, 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 continue to unfold. Nationwide, current fraud total estimates range from $87 billion to $400 billion.

The most recent data from the US Department of Labor indicates California’s outstanding loans as of August 24 from the Federal Unemployment Account rose to $23.7 billion. Combining EDD’s May projections with the cash flow results to date, total debt is likely to reach around $30 billion by the end of 2022. 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.

In the current debt circumstances, California employers are locked into paying the higher F+ state rates likely for more than another decade, while the federal tax increases are currently slated to start going into effect next year. These tax increases will more than outweigh the assistance recently included in the state budget, more than offsetting that effort to stimulate jobs restoration in the state.

The number of states with a federal fund debt remains at only 15 (plus the Virgin Islands). California accounts for 44% of the total.