Initial claims for the week of January 1 rose slightly compared to the prior week but were down overall by about 10% compared to the first three weeks of December. Initial claims in California rose 4.1%. Initial claims in the other states were up 26.6% primarily as the result of higher claims in the Mid-Atlantic, New England, and Upper Midwest states. The seasonally adjusted number being reported for the US as a whole was up 3.5% from the revised number from last week. 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.

California accounted for 16.1% of all initial claims and 21.4% of insured unemployed (week of December 4; a proxy for the number of workers receiving unemployment). The US unadjusted total was 46% above the pre-pandemic average in 2019, while California was 26% above.

As reported for the week of December 25, the revised EDD backlog has essentially stabilized at an average of 40,000 during December. The backlog as currently defined by EDD represents under a week’s worth of processed claims.

These are the official numbers. Instead, 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.

Call center activity was down sharply during the holidays. Even with this substantial easing of the workload, it still took an average of 2.5 calls to reach EDD.

In the most recent data from the EDD, California paid out a total of $179.7 billion in benefits under all the UI programs since the week of March 7, 2020 and through the week of December 25, 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 the US Department of Labor indicates California’s outstanding loans as of January 4 from the Federal Unemployment Account were $19.7 billion. EDD’s October projections lowered their previous estimates, but still show a $21.8 billion deficit 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. The most recent state to use federal funds to remove this barrier to jobs growth was Texas, which applied ARPA funds to pay off its federal debt to avoid higher federal taxes on employment, restore its state fund to avoid higher state taxes, and fund reforms to its state program in order to improve efficiencies in the event of the next downturn.

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 (Virgin Islands). California is responsible for 49.1% of the overall total.

As reported by the Department of Finance, general fund revenues through the end of November are already running $18.2 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. Updated numbers will be released next week as part of the Proposed Budget for 2022-23.