Coronavirus layoffs skyrocket, catching nearly half of state unemployment programs unprepared
Early estimates suggest that at least a million workers could lose their jobs in March
State unemployment insurance systems across the U.S. are ill-equipped to handle the expected deluge of claims from workers who are getting laid off at an unprecedented pace as the coronavirus pandemic ravages the U.S. economy.
Early estimates suggest that at least a million workers could lose their jobs in March, a stunning and dramatic turnaround from February, when employers added 273,000 jobs and unemployment dipped to 3.5 percent, a half-century low.
States, which administer unemployment benefits to workers who qualify, rely on employer taxes that they use to finance their insurance programs. But despite the historically long, 11-year economic expansion, 22 states’ unemployment trust funds are unprepared to pay out enough in unemployment benefits in the case of a recession, according to Labor Department data.
The trust funds need to have enough to pay benefits for a full year in order to be considered recession-ready.
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Typically, state benefits last up to six months for laid-off workers, but the federal government often extends the program for a year or more during times of economic crisis.
While it’s still unclear how sharp a downturn would be in the U.S., social distancing, which has led to school cancellations, mandatory work-from-home policies, grounded airplanes, anchored cruise ships and the abrupt closing of shops, restaurants and bars throughout the country, is almost guaranteed to cause a huge slump in consumer spending, which powers about two-thirds of the country’s GDP, indicating it could cause deep economic pain.
"A coronavirus recession is inevitable," Josh Bivens, director of research at the left-leaning Economic Policy Institute, wrote in a recent blog post. Bivens estimated that at least 3 million jobs will be lost by summer, putting the U.S. on a pace of job loss comparable to the worst month of the 2008 financial crisis.
But states like California, Massachusetts, New York and Ohio haven’t restored their funds since the Great Recession more than a decade ago. Unemployment insurance trust funds went insolvent in 35 states following the most recent recession, prompting some governments to reduce benefits.
According to the Center on Budget and Policy Priorities, a left-leaning think tank, 16 states have restrictive criteria that fewer than 20 percent of laid-off workers in the state are able to receive unemployment benefits. Congress has the power to increase the size of the unemployment check and to expand benefits to “gig” workers and self-employed individuals.
But some states, thanks to low unemployment, have built up their trust funds well above the recommended minimum solvency level, including: Vermont, Oregon, Wyoming and Mississippi.
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“Our trust fund has been an amazing, very solvent fund,” said Isabel Joslen, an assistant division director at the unemployment insurance division at Oregon’s employment department. “We always have enough funds to be able to cover for about 18 months or more of unemployment.”
During the past three days, unemployment insurance offices around the country were flooded with phone calls, and state unemployment websites crashed in Kentucky, Oregon and New York.
The White House and Congress have so far passed two stimulus packages, including $8.3 billion in funding for prevention efforts and research, and a bill that extends paid sick leave to most Americans and provides free testing for COVID-19, the disease caused by the novel coronavirus.
Work is currently underway on a third package that could cost as much as $1 trillion and would include a bailout for hard-hit industries like the airlines and cash checks for most Americans.
"We're looking at sending checks to Americans immediately. And what we've heard from hard-working Americans, many companies have now shut down, whether it's bars or restaurants. Americans need cash now, and the president wants to get cash now. And I mean, now, in the next two weeks," Treasury Secretary Steven Mnuchin said on Wednesday.