Initial claims within California dropped 13.4% during the week of October 2, while claims in the rest of the country fell 14.0%. In all, California contained 26.3% of all initial claims filed during the week. PUA initial claims—which are still being processed for claims covering the previously eligible period—rose to 12,826.

While dropping, California claims remained at levels previously seen in late April through early June. The US total represents a new pandemic period low.

The Household Pulse Survey conducted throughout the pandemic period by the Census Bureau includes a tracking question on the reasons given by adults age 18 and over for why they are not working. The chart below compares the distribution of reasons given just prior to the state’s reopening on June 15 (survey done 5/26 to 6/7) and the most current responses (9/15 to 9/27).

Overall, the results show little change in the number of adults not working in this period for reasons other than retirement. The California total notched up 0.3% and the rest of the nation 0.8%. Retirement, however, is the most often cited reason for not working, and consistent with the monthly labor force results has been increasing above pre-pandemic rates as many older workers chose early retirement during this period.

Among the listed reasons, adults choosing not to work shows the largest increase, from 8.3% to 13.2%. However, those giving another reason and those choosing not to answer combined rose from 10.9% to 18.3%, and likely includes a significant number choosing not to work but were reluctant to state so on a survey from a federal agency during a period of increased focus on unemployment fraud and work search requirements for those receiving unemployment benefits. This factor is reinforced by the fact that only about half of the benefit recipients during this period are matched by those indicating they had lost a job (laid off or employer closed temporarily or permanently). Even incorporating those providing elderly and child care and consequently eligible for PUA shows a shortfall of 600-800,000 in most recent results.

Layoffs due to the pandemic remain high, but about 30% lower compared to the survey results at the beginning of the year when the state was still in its second round of state-ordered closures. Job losses from permanent and temporary business closures are up as the result of the additional rounds of restrictions due to the Delta variant (10.1% combined vs. 8.8%) but are down substantially from the beginning of the year (18.6%). Those not working due to elderly care are little changed, but those providing childcare is down substantially, in large part likely, likely due to the reopening of in-person classes at many schools. The number not working due to being sick with COVID, caring for someone who is sick or disabled has nearly doubled in the period shown in the chart, again likely due to Delta, but was only a quarter of the persons citing this reason at the beginning of the year.

Comparing California to responses in the rest of the country, the largest difference is in the share indicating they did not want to work (13.2% vs. 8.5%). Business closure reasons were more prevalent (10.1% vs. 6.0% for temporary and permanent closures combined), while those being laid off due to COVID was only slightly higher (8.3% vs. 6.9%). Those sick with or caring for someone with COVID or disabled was essentially the same.

Revised backlog numbers awaiting EDD action edged down 2.2% the week of October 2, while the backlog due to all sources dipped 3.4%.

In the related call center activity, overall activity levels resumed a decline, with a marginal increase of 1.9% in the number of calls answered following the sharp drop in prior weeks. The average number of calls required to reach EDD dropped to 8.1, the best level since February.

In the most recent data from the EDD, California paid out a total of $176.3 billion in benefits under all the UI programs since the week of March 7, 2020, and through the week of September 25, 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. 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 US Department of Labor indicates California’s outstanding loans as of October 4 from the Federal Unemployment Account were $19.7 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, although the rise in debt has slowed over the past month. 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 a prior 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.