Initial claims within California again jumped during the week of September 25, rising 26.1%, while claims in the rest of the country dropped 11.1%. In all, California contained 41.0% of all initial claims processed during the week. PUA initial claims—which are still being processed for claims covering the previously eligible period—rose to 7,530.

California claims were at their highest level since the beginning of April 2021. Nationally, the California numbers kept the total at levels seen in August.

Even as activity levels decreased due to the expiration of the federal enhancements, the revised backlog numbers awaiting EDD action rose 3.9% the week of September 11, while the backlog due to all sources rose 6.4%.

In the related call center data, overall activity levels were relatively stable but with a 22.7% rise in the number of calls answered after the sharp drop in the prior weeks. Still, it took an average of 9.4 calls to connect with EDD.

In the most recent data from the EDD, California paid out a total of $175.7 billion in benefits under all the UI programs since the week of March 7, 2020, and through the week of September 18, 2021. The most current estimate from the EDD is 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. While much of this fraud was driven by the federal pandemic enhancements, the sharp rise in fraudulent payments under the regular UI program included the components paid through the state fund, further increasing the debt that in the absence of budget action will be paid off by sharply higher taxes on the businesses that are now trying to recover jobs in the state.

The most recent data from the US Department of Labor indicates California’s outstanding loans as of September 28 from the Federal Unemployment Account were $19.6 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. 

The latest federal debt data, however, also illustrates the high degree to which this soaring debt was the result of pandemic policies followed in California and, at best, in a few other states. Only 11 states and one territory (Virgin Islands) now have a debt to the federal fund. California constitutes 43% of the total.

As discussed in last week’s report, a recent Tax Foundation analysis indicates that 31 states have used a portion of their federal pandemic relief funds under the CARES Act and ARPA to support their unemployment funds. In total, these states allocated $15.4 billion for this purpose, including some administrative support to deal with spiking workloads but primarily to pay off state fund debts. California is listed as allocating a total of only $6 million for this purpose, in spite of receiving the largest share of the federal funds and running up by far the largest state UI fund debt.