Unemployment Rate Continues to Rise Amid Coronavirus Pandemic

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The week of March 16, 2020, nonessential stores in Washington D.C. were forced to close their doors to prevent the spread of the coronavirus. These newly unemployed people will be without a paycheck for an undetermined length of time.

Tens of millions of Americans’ livelihoods are now in doubt because of the coronavirus pandemic and now unemployment.

Where Unemployment Is at Today

On Thursday, March 27, the weekly unemployment report put out by the Department of Labor, is set to offer the clearest evidence of the devastating impact the coronavirus has had on the economy.

The unemployment report is expected to hit a new record, but behind those numbers are the worried people.

Ali Nelson is an optician. Last week she sent out the few final orders she had and locked her doors not knowing when she will be able to return to work. She has filed for unemployment benefits, along with over three million other workers. The process is relatively painless and it only takes a few minutes online. However, Nelson is not sure how she will feed and care for her family with unemployment benefits.

Nelson is not sure how much money she will garner from unemployment. The maximum that is offered in Washington D.C. is about $450 a week. However, that will not cover the doctor’s rent in Fairfax County, Virginia, in addition to health insurance, food, and utilities for her family of six.

“This is not sustainable,” stated Nelson, 52, who is the primary breadwinner for her family, which includes her veteran husband who is in school and two working children.

There are millions of Americans in similar predicaments who are preparing for life on unemployment benefits. Many are experiencing unemployment for the first time as retail stores, movie theaters, restaurants, hair and nail salons, and other small businesses close their doors amid the coronavirus outbreak.

What Is Being Done to Assist Unemployed Workers?

In the meantime, Congress is voting on a stimulus package that would boost unemployment benefits by $600 a week. The stimulus bill could also expand access to unemployment benefits to include self-employed workers and freelancers, who are not normally covered by the traditional program.

The amount of money out-of-work American citizens will receive from unemployment benefits is still being determined by Congress. However, the stimulus bill has passed in the Senate and it is expected to do the same in the House.

The way unemployment normally works, the amount of the benefits is equal to about half of a worker’s previous pay. It is less than half in other developed countries.

If the bill passes the week of March 24, it will not be clear when unemployed workers will receive cash. The surge in unemployment claims has overwhelmed some states and has led to delays in processing.  Payments of $1,200 per low and mid-income adults that have been promised by the White House may take the tax agency months to process.

The uncertainty is creating stress and anxiety in the newly-unemployed American citizens.

Scott Thomas, 34, was the co-creative director for The Ride, a Manhattan tour. He lost his job last week. He said he had to jump through hoops to file for unemployment this week. Additionally, Thomas postponed his Las Vegas vacation for the summer. He said he “didn’t want to take the financial risk.”

What Will Unemployment Benefits Offer?

Unemployment benefits were designed to help tide workers over financially while they seek new employment. Unemployment benefits can help the economy rebound faster from an economic downturn by providing households with money to spend. That being said, the generosity of the unemployment program is administered by states, therefore, payments vary across the country.

Individual statses determine the level of wages that are subject to unemployment insurance taxes, as long is it above the federal minimum of $7,000. This is according to a report put together by the W.E. Upjohn Institute for Employment Research. Many states collect taxes from a low base and some states payout lower unemployment benefits.

The program offers unemployed people benefits for a shorter time period with more conditions to meet than many other advanced countries, according to a report published, October 2019 from the United Nations’ International Labor Office.

The average weekly unemployment benefit in the fourth quarter was $377. Averages ranged from a little more than $200 in some states to over $500 in other states.

For households that have little or no savings, that money will not cover the essential bills. Half of the households in the U.S. have no emergency savings, and almost 40 percent would struggle to afford an unexpected expense of $400. This information came from a survey conducted by the Federal Reserve.

According to the study, Hispanic and African-American workers are more likely to struggle in paying their monthly bills, as well as those who hold a high school diploma or less.

What Is the Future of Unemployment Benefits?

Changes are being considered that will expand access to the unemployment program and increase weekly payments. Economists say the new bill will highlight the holes in the economic safety net.

“As important as these programs are, they’re not going to be sufficient in a lot of cases,” states Dave Cooper, who is the senior economic analyst for the Economic Policy Institute in Washington D.C.

“Unfortunately, unemployment benefits may not be enough for some folks to pay their bills.”

While Congress is figuring out what to do, the benefits for unemployed workers can be significantly low if it is not adjusted.

Twenty-six-year-old Louis DeAngelis worked as a bartender in Plymouth, New Hampshire, until early last week when the governor closed all bars and restaurants because of the coronavirus pandemic. He did not experience any problems applying for unemployment benefits but learned he will be receiving $159 a week, which is slightly less than half of his weekly income.

DeAngelis said that the amount of money he will receive from unemployment will not cover his rent. He was planning to move to a new apartment in April. Now, he is having to look into staying with friends or family. He will likely have to use the money he saved to pay the security deposit at his new place to purchase groceries, pay his phone bill, car payment, insurance, and utilities.

“I’m fortunate to have some family who are willing to help. I’ve got options, but a lot of folks don’t.”

Last week, almost 3.3 million American citizens applied for unemployment benefits. That is more than quadruple the record that was set in 1982. This surge in unemployment applications is a clear indication of the economic damage caused by the coronavirus outbreak.

This surge is only the beginning, as the pace of layoffs will accelerate, and the economy will continue to sink into a recession. The revenue has collapsed for restaurants, hotels, movie theaters, gyms, and airlines. Additionally, auto sales are plummeting and carmakers have closed their factories. These types of employers have loan payments and other fixed costs to maintain, so they are cutting jobs to save money.

As the rise in unemployment continues, some economists believe the nation’s unemployment rate could approach 13 percent by May. To have a comparison: the highest unemployment rate during the Great Depression, which ended in 2009, was 10 percent.

What Is the Unemployment Rate and for How Long?

The deterioration of the economy has been swift. In February, the unemployment rate was at a 50-year low at 3.5 percent. The economy was growing modestly at a steady pace. However, by the April-June quarter, economists believe the economy will shrink at its steepest annual pace – a contraction that may reach 30 percent.

The workers who have lost their jobs in recent days have not been able to apply for unemployment benefits. The state websites and phone systems have been overwhelmed by the number of unemployed applicants and have frozen up. That result suggests that Thursday’s report on filings for unemployment benefits understates the magnitude of job cuts last week.

Layoffs are surging, and a significant expansion of unemployment benefits for the millions of people who will lose their jobs due to the coronavirus pandemic was included in the stimulus bill that is nearing approval in Congress. One of the provisions in the stimulus package would provide an extra $600 a week on top of the unemployment aid provided by states. Another provision would extend unemployment benefits 13 weeks beyond the six months of aid offered by most states.

A separate bill passed last week that provides up to $1 billion to states so they can enhance their ability to process unemployment claims. That money, however, will take time to disburse.

Jessy Morancy from Hollywood, Florida, was laid off from her job as a wheelchair attendant and customer service agent at Fort Lauderdale Airport on Friday. Morancy is 29. She called her unemployment office Monday to file for benefits. She encountered a recording telling her to call back later.

She is concerned because even if she receives full benefits it will only be $275 a week, which is less than half of what she was earning. This is not enough money to provide for her 7-and 10-year-old children.

Morancy stated that she is “still in a state of shock.”

Morancy said she heard that airline employees could continue to receive salaries if Congress provides the necessary assistance to the airline industry. It is not clear if employees who work for contractors – Eulen America, in her case, – would be eligible to receive those benefits.

“If these companies are going to get a bailout, why not include us?” Morancy wonders.

Filing an Unemployment Claim

For those workers who have been able to file their unemployment claim, the benefits may take a while to kick in. Normally, it takes two to three weeks for unemployed applicants to receive any money. State agencies have to first contact former employers to verify work and earnings history. Then, the employee’s weekly unemployment benefits can be determined.

Increasing the problems, many state agencies that handle unemployment claims are operating at historically low funding levels and staffing that is intended to handle a trickle of claims.

It was only weeks ago that the job market was in the best shape it had been in decades.

Kim Boldrini-Sen, 41, has struggled to file her unemployment claim. She has tried twice in two different states because she works in Connecticut and lives in New York. In Connecticut, she works as a private acupuncturist, and she has her own acupuncture business in New York.

She thought her unemployment application in Connecticut had been submitted. However, when she returned to re-file she learned that there was no record of her initial filing. After taking an hour to re-file, a pop-up notice informed her she was not eligible to re-file online.

When Boldrini-Sen applied for unemployment benefits in New York, the website crashed continuously once she was halfway through her claim. When she was finally able to click submit, she saw a pop-up message telling her to file by telephone. That has not been helpful.

“I’ve called at all hours of the day. That’s been my life for a week, and I still can’t get through to anyone.”

On Monday, the New York State Department of Labor tweeted: “If you have been unable to get through our phone and/or online system this week, please keep trying. We are working as hard as we can to ensure that all [unemployment] benefits are paid and appreciate your patience.”

Where Is the Economy and Unemployment Heading?

An economist at Morgan Stanley, Ellen Zentner, told clients that 17 million jobs would be lost through May. That number is twice the 8.7 million jobs that were lost during the Great Recession. Zentner expects that the unemployment rate will average 12.8 percent in the April-June quarter, which is the highest level since the 1930s.

She also anticipates that the economy will begin to recover by the second half of the year. I will take a while for things to return to close to normal she believes. She says the unemployment rate could still top five percent by the end of next year.

By Jeanette Vietti

Sources:

St. Louis Post-Dispatch: Newly jobless Americans worry about making ends meet
WBNS 10TV: US jobless claims soar to record 3.3 million as layoffs jump
Business Day: Jobless in America is a new and bewildering experience for many

Image Courtesy of petr’s Flickr Page – Creative Commons License

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