The Department of Labor reported some bad news—861,000 Americans filed for unemployment benefits last week. The recent trend shows that the job market is still in bad shape.
To put things into context, prior to the pandemic, the highest level of unemployment claims was roughly 700,000 during the financial crisis in 2008. The United States has been hitting these figures—and higher—for a while now. Thursday’s report indicated that “18.3 million people were receiving unemployment aid as of January 30.” A large portion of Americans out of work are long-term unemployed, which means that they have been out of a job for over six months.
The data from the Labor Department reflects a stubborn, stalled job market. Roughly 10 million jobs are still lost since the outbreak started last March. The unemployment rate fell last month from 6.7% to 6.3%. However, economists say that this could be due to people opting out of the job market, as they are unable to find suitable roles.
Those who have exhausted their claims, ultimately, fall off of the government radar and are not included in the weekly and monthly reports. An uncomfortably large number of women have left the job market, as they have had to homeschool and take care of their children.
The federal government also does not factor in the quality of the jobs. A person could be a mechanical engineer with advanced degrees and earning a handsome living, but due to the current market, he had to take a job in the gig economy, earning considerably less money.
Older workers have been pushed out of the workforce, as they were not able to find any suitable opportunities.
There is speculation that the unemployment figures could be artificially skewed higher due to fraudulent claims. The Chicago Tribune reported, “Reports of fraud have been so widespread—often inundating local police departments—that the FBI, IRS and several state agencies launched a task force to tackle the problem.”
The New York Post wrote, “New York officials caught more than $5.5 billion in fraudulent unemployment benefit claims over the course of the [Covid-19] pandemic that’s spanned 11 months and ravaged the state economy.”
Los Angeles ABC News claimed, “As California’s Employment Development Department (EDD) works to uncover the true level of fraudulent unemployment claims, one lawmaker is now breaking down how much he estimates it could cost taxpayers.” The report continued, “So far, the EDD has confirmed about $11 billion of the payments it made during the coronavirus pandemic are fraudulent and said that number might be as high as $30 billion.”
USA Today ran an investigative piece about unemployment fraud, stating, “The Department of Labor’s Office of the Inspector General estimated in a November report that these schemes and others targeting pandemic unemployment payments represented about $36 billion in losses through November.”
There are some bright spots. The federal government offered unemployment aid programs to help people get through this crisis. One of the plans provides up to an extra 24 weeks of aid. The second program offers coverage to self-employed and gig workers, who weren’t previously permitted to make claims. This Pandemic Unemployment Assistances was extended until March 14 through the prior $900 billion rescue package.
Marianne Wanamaker, a labor economist at the University of Tennessee, Knoxville, said, “Things are not as stalled as they were in January, but we don’t have any momentum.”
President Joe Biden introduced a $1.9 trillion package to jump-start the economy and job market. His program will include an additional $400 a week in federal jobless aid, in addition to state benefits.
States, such as New York, New Jersey and California, have been loosening up restrictions, which should invigorate businesses. The last round of $600 stimulus checks resulted in increased sales at retail stores and restaurants, jumping 5.3% in January.
There is a strong belief that once the vaccines are rolled out, coupled with large financial stimulus packages and aid to the needy, the economy will come back strong.