Initial claims within California dropped 10.8% during the week of October 23, while claims in the rest of the country eased 2.1%. The seasonally adjusted number of claims dropped 3.4% for the US. In all, California continued to perform below the rest of the US, with 26.5% of all initial claims filed during the week. This performance would indicate a continued slowing in California’s recovery pace compared to the rest of the nation as reflected in the recently released job and employment numbers for September.

California claims remained at levels previously seen in July and August 2021. The US number was the lowest since the beginning of the pandemic period and only 14% above the average in 2019.

Insights into the continued high level of claims in California compared to the rest of the nation can be seen in the Census Bureau’s Household Pulse Survey. In the latest results for 9/29 – 10/11 compared to just prior to the state’s reopening, non-COVID reasons (the first six categories in the chart below) continue to be dominant factors given for increases in the number of people who are unemployed. Retirements are again one of the highest stated reasons, with persons voluntarily choosing not to be employed being the third highest. However, those not answering this question remains high, and likely includes a number choosing voluntary unemployment but who are reluctant to state a reason given current focus on fraud and work requirements within the program.

The COVID-related reasons (bottom seven categories) continue to decline. Those related to employment are down 34% overall, or essentially equivalent to the 31% drop seen in the rest of the country.

Comparing the most recent reasons given in California to the rest of the US, other differences emerge. Persons laid off due to COVID, either themselves or as a result of their employer temporarily closing, were somewhat higher in the state, while those unemployed due to employer closures were about the same. Retirements were more likely in the rest of the country, likely due to cost of living structures that are more favorable to this option outside of the state. Californians, however, continue to be more likely to say they do not want to be employed or do not state a reason in the survey.

As reported for the week of October 16, the revised EDD backlog dropped 14.3%, while the backlog due to all sources dropped 11.9%.

In the related call center activity, overall activity levels were down sharply. The average number of calls required to reach EDD reached its best level since last year, but still required 4.9 calls to get through to the Department.

But while the reported backlog numbers are showing improvement, additional blockages in the system keep arising. One of the strategies used by EDD to work down its backlog was to issue benefits conditionally to hundreds of thousands of applicants. The Department is now in the process of verifying eligibility retroactively, with those previously receiving benefits now waiting up to 26 weeks for an interview to confirm their claims were legitimate.

As the federal benefit enhancement provisions began to expire in September, the state urged prior beneficiaries to apply for other state benefits instead. In the process, the backlog appears to have been transferred to other agencies as well. Applicants for CalFresh (food stamps) are reported as waiting up to 26 weeks for benefits after they apply.

While many of the bureaucratic blockages arose from the surge in applicants due the pandemic, the accumulating stories also illustrate the challenges and inequities that arise when attempting to replace jobs-based incomes with government issued social benefits. Much of the economy escaped dependency on this alternative by shifting quickly to alternative employment modes such as remote work, but these inefficiencies continue to drag especially on the lower-wage workers hit hardest by the state’s shutdown orders and other workers unable to shift to these modes either because of the nature of their work or because of state regulations restricting this option only to the higher wages.

In the most recent data from the EDD, California paid out a total of $177.6 billion in benefits under all the UI programs since the week of March 7, 2020 and through the week of October 16, 2021. The most current estimate from EDD is that $20 billion of unemployment benefits was paid out to fraudulent claims. 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 October 26 from the Federal Unemployment Account were $19.8 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 continues to show how this growing debt is an issue generated by policies followed in California and at best a few other states. Only 11 states and one territory (the 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 shows that the issue has been handled differently elsewhere, with 31 states using $15.4 billion of their federal pandemic relief funds under the CARES Act and ARPA to support their unemployment funds. California is listed is allocating a total of only $6 million for this purpose, in spite of receiving the largest share of the federal funds, running up by far the largest state UI fund debt, and generating unprecedented revenue surpluses through its own resources both for the 2021-22 Budget and likely for next year’s budget as well. As reported by the Department of Finance, general fund revenues through the end of September are already running $13.9 billion ahead of the levels projected in the current budget bill.