Unemployment claims are soaring. Are the states ready for the onslaught?
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Last Friday was Steve Banchero’s last day of work at David Kerr Violin Shop in Portland, Oregon, where he’s fixed instruments for 30 years. With music performances cancelled and business down, the shop has closed indefinitely.
Layoffs are skyrocketing across the country as COVID-19 spreads along with government instructions to stay home.
Those job losses will start showing up in a Labor Department report due tomorrow: the count of first-time claims for unemployment benefits from all 50 states, the District of Columbia and Puerto Rico. Predictions range from a million new claims — which would be astronomical — to more than 2.5 million. And that’s just for last week.
State unemployment insurance is the first-line safety net for laid-off workers. But many states have cut back since the Great Recession and cover fewer people and offer lower benefits.
Congress, though, is coming to the rescue, promising to send states $1 billion in help with staffing and administration to deal with the onslaught of claims.
And the stimulus bill the Senate has now agreed to will reportedly provide an estimated $200 billion dollars in federal money to pay jobless benefits to workers laid off during the pandemic, workers like Banchero.
“We can do some work at home and we can do repairs, but it’s not exactly a telecommuting business,” he said.
Banchero didn’t apply for unemployment right away. He had heard horror stories of the Oregon website crashing. He finally tried Tuesday night and after some initial glitches, got his claim filed.
Congress is sending money to the states to beef up staffing and administration. But many states make qualifying for and receiving benefits difficult, according to Michael Graetz, professor of tax law at Columbia Law School. Since the Great Recession, some states have reduced unemployment payments, and eight states no longer offer the standard 26 weeks of benefits.
“We’ve got poor and inadequate finance, very inadequate coverage,” Graetz said. “It’s just an archaic, ineffective system.”
The Senate’s new stimulus bill will send billions more to the states, said Michele Evermore, senior policy analyst at the National Employment Law Project.
“I think this will go a long way to smoothing the transition into the next recession,” she said.
It will pay benefits to workers staying at home to care for family members, plus the self-employed and independent contractors.
“This bill also will give everyone — whether they’re on the new pandemic unemployment assistance program or traditional unemployment insurance — an extra $600 dollars a week for four months,” Evermore said. “That increase is huge.”
Evermore says the goal is to replace workers’ pre-coronavirus paychecks and make sure people remain eligible for benefits without having to go out and look for work — the last thing they should be doing during a pandemic.
COVID-19 Economy FAQs
What do I need to know about tax season this year?
Glad you asked! We have a whole separate FAQ section on that. Some quick hits: The deadline has been extended from April 15 to May 17 for individuals. Also, millions of people received unemployment benefits in 2020 — up to $10,200 of which will now be tax-free for those with an adjusted gross income of less than $150,000. And, for those who filed before the American Rescue Plan passed, simply put, you do not need to file an amended return at the moment. Find answers to the rest of your questions here.
How long will it be until the economy is back to normal?
It feels like things are getting better, more and more people getting vaccinated, more businesses opening, but we’re not entirely out of the woods. To illustrate: two recent pieces of news from the Centers for Disease Control. Item 1: The CDC is extending its tenant eviction moratorium to June 30. Item 2: The cruise industry didn’t get what it wanted — restrictions on sailing from U.S. ports will stay in place until November. Very different issues with different stakes, but both point to the fact that the CDC thinks we still have a ways to go before the pandemic is over, according to Dr. Philip Landrigan, who used to work at the CDC and now teaches at Boston College.
How are those COVID relief payments affecting consumers?
Payments started going out within days of President Joe Biden signing the American Rescue Plan, and that’s been a big shot in the arm for consumers, said John Leer at Morning Consult, which polls Americans every day. “Consumer confidence is really on a tear. They are growing more confident at a faster rate than they have following the prior two stimulus packages.” Leer said this time around the checks are bigger and they’re getting out faster. Now, rising confidence is likely to spark more consumer spending. But Lisa Rowan at Forbes Advisor said it’s not clear how much or how fast.
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