Initial claims for the week of December 4 reversed the downward trend of the past two weeks. Initial claims in California rose 20.8%. Initial claims in the other states rose more quickly at 31.7%. The seasonally adjusted number being reported for the US as a whole was down 8.9%, falling to its lowest level in 52 years. This result, however, reflects the Department’s continuing efforts to adjust its seasonal adjustment formulas, overlaying seasonal factors on top of the predominant pandemic causes.

While the weekly numbers were somewhat better, California’s recovery overall continues to lag the rest of the states. California accounted for 20.2% of all initial claims and 24.2% of insured unemployed (week of November 27; a proxy for the number of workers receiving unemployment). The US total was 30% above the pre-pandemic average in 2019, while California was 40% above. As with all these reports, the December 4 numbers are preliminary and will be revised in next week’s report.

As reported for the week of November 27, the revised EDD backlog rose slightly, while the backlog due to all sources was essentially unchanged. The backlog as currently defined by EDD now represents under a week’s worth of processed claims.

However, procedures used to accelerate claims processing have since been revised, with EDD now revisiting about 1 million previously approved PUA claims. Recipients who were approved for more than base PUA weekly benefit must now submit new employment verification information, and if unable to do so, are potentially liable for repayment of the full amount plus a 30% penalty if EDD determines a beneficiary intentionally gave false information or withheld information.

The related call center data shows sharp drops in overall activity due to the Thanksgiving holiday, but with the sharpest fall—nearly by half—in the number of answered calls. As a result, the average number of calls required to reach EDD eased to only 3.8.

In the most recent data from the EDD, California paid out a total of $179.0 billion in benefits under all the UI programs since the week of March 7, 2020, and through the week of November 27, 2021. The most current estimate from EDD is that $20 billion of unemployment benefits was paid out to fraudulent claims, much of which was from the federal pandemic enhancements but which also includes the base payments from the regular program that in the absence of budget action will be paid back through higher taxes on employers.

The most recent data from US Department of Labor indicates California’s outstanding loans as of November 29 from the Federal Unemployment Account were $19.4 billion. EDD’s October projections lowered their previous estimates, but still show a $20.2 billion deficit by the end of 2021, $21.8 billion by the end of 2022, and $21.5 billion by the end of 2023. This continuing deficit projection is a clear indication that the state fund will be unable to recover quickly on its own even with the higher state and federal taxes imposed on employers during a period they will still be attempting to rebuild from the pandemic shutdowns.

Updating the recent Tax Foundation analysis, a total of 19 states have used $15.7 billion in ARPA funds to pay down their federal debts, while 23 states previously used $7.6 billion in CARES funds for debt payments and program operations, including California at only $6 million in spite of receiving the largest amounts of any state under both assistance bills.

As more states have paid off their debts with ARPA funds, the latest federal debt data shows the debt issue is limited to 9 states and one territory (the Virgin Islands). California is responsible for 49.4% of the overall total.

As reported by the Department of Finance, general fund revenues through the end of October are already running $16.0 billion ahead of the levels projected in the current budget bill. In their Fiscal Outlook for the 2022-23 budget cycle, LAO projects a discretionary surplus of $31 billion in their mid-range forecast, and up to $60 billion in the high end. Operating surpluses are also expected to continue in the $3 billion to $8 billion range in the following years.