The Department of Labor reported Thursday that 860,000 Americans filed for first-time unemployment benefits the week ending Sept. 12. Over the last six months of the Covid-19 pandemic, roughly 61 million people have filed for unemployment benefits in the United States.
The numbers are staggering and suggest that the economy is in trouble and hiring is anemic—at best. However, there’s reason to question the validity of the Labor Department’s data.
CBS News reported that the Pandemic Unemployment Assistance (PUA), “a hastily-enacted government program designed to help Americans through the pandemic is facing a growing problem with fraud.” According to the report, PUA “has become the target of scammers who steal people’s identities to apply for benefits they are not entitled to.” Politico wrote, “These perpetrators are often using stolen identity information from national and global data breaches, as well as exploiting expedited payment efforts in the federal PUA program.”
A large amount of the total unemployment claims, nearly 15 million, have been made through the PUA. This is a newly developed federal government program, which was part of a $2.2 trillion relief package. The goal was to offer financial benefits to self-employed people, independent contractors, those engaged in the gig economy, part-time workers and others who were previously deemed ineligible for unemployment insurance. The numbers are substantial. About $47 billion in PUA money has been paid out to people, according to the Labor Department.
The California Policy Lab at UCLA and the Labor Market Information Division at the California Employment Development Department conducted a study of the PUA—with an emphasis on California. Their report shows a “surge of potentially fraudulent PUA claims,” which reflects an inaccurate and inflated number of unemployed people. The New York Times cites that “twenty-one inmates in the San Mateo County, Calif. jail filed for pandemic unemployment assistance, resulting in payments of at least $250,000, according to the district attorney.”
There’s mounting evidence of problems at the state level and with the Labor Department, in regards to the oversight of people initiating claims. Cher Haavind, deputy executive director of the Colorado Department of Labor, said about the system, “Nationally, it’s just presented an opportunity for criminals to take advantage of a program that doesn’t have a lot of safety measures in place.”
The PUA program accounts for almost half of the total recipients collecting benefits. Roughly 7 million people are receiving PUA benefits in California, but the state’s data suggests the number could be less than 2 million. With the overwhelming onslaught of applications, there may have been discrepancies, multiple countings and rushed payments without appropriate reviews.
“We do suspect that a big part of the unusual recent rise in PUA claims is linked to fraud,” said Loree Levy, a spokesperson for the California Employment Development Department. She said the state was investigating “unscrupulous attacks” exploiting identity theft and vulnerabilities in the system.
Wayne Vroman, an economist at the Urban Institute, believes that the PUA is more susceptible to fraud due to a glitch in the system. “While state unemployment programs are tied to businesses’ tax records, the pandemic program asks self-employed workers to report their own income and other information, opening the system up to abuse,” Vroman said. He added, “There has to be a lot more fraud. Eventually, you’re supposed to verify eligibility against individual tax forms, but I don’t think states have time to check on accuracy of the income reporting.”
It’s not just the PUA that has issues. The monthly jobs report is riddled with potential problems, which may create a false portrait of the real employment numbers.
A curious and questionable part of ascertaining the employment figures is based on “household surveys” of about 60,000 families. This data is based upon assumptions and estimates. The monthly jobs report is based on surveys. Unlike the U.S. Census, which seeks to actually count every person living in the U.S., unemployment data is not an actual count of the number of jobs added or the number of unemployed people. There are more than 162 million Americans in the labor force and there are nearly 7 million business establishments in the U.S. today.
A statistical technique called seasonal adjustment is used. This process uses past history of seasonal fluctuations (winter, holidays, summertime, etc). Their thesis is that the number of employed and unemployed people reflect the seasonal weather patterns that tend to be repeated year after year that affect hiring. The government models attempt to remove the effects of regular seasonal fluctuations on the data.
Mistakes happen. For instance, there was a glaring error, admitted by the Labor Department in the May jobs report. The footnotes of the report indicated that the jobs report was inaccurate for two months. The Bureau of Labor Statistics has admitted that government household survey takers mistakenly counted about 4.9 million people as employed, although they were unemployed.
The U.S. government also relies upon something called the “birth-death model.” This is a model related to businesses that start up and those that fail. The government uses models to calculate how many jobs were gained or lost, as businesses started and shut down. Clearly the Covid-19 months would reflect considerably less new business startups and far more closures, but using a model that’s not updated would offer faulty information. We’ve already seen the medical professionals’ models predicting millions of deaths, due to Covid-19, were far from accurate.
It doesn’t measure true unemployment. If a person finishes collecting their allotted benefits and is still without a job, they’re not counted any longer. These people fall off the radar. Although they are still unemployed, these folks don’t show up in the data.
The weekly and monthly jobs reports are widely viewed by the public as a barometer of the economy and job market. Important decisions are made by the the American people and CEOs based on the data provided by the government. Given the weight attached to these numbers, it begs the question: why hasn’t the data collection process been modernized? Additionally, in light of the fraud allegations, why isn’t there tighter regulation over the entire process?