Policy Analysis | March 2021

Unemployment in the SLC Region Amid the COVID-19 Pandemic

Roger Moore

Disclaimer: On November 30, 2020, the Government Accountability Office (GAO) reported that the U.S. Department of Labor inaccurately reported the number of people filing for unemployment benefits during the pandemic. Due to the historic number of individuals filing for benefits beginning in March 2020, and states' frequent backlogs processing the claims, the traditional method of reporting unemployment did not accurately capture the number of unique individuals claiming benefits, according to the GAO report. For example, if a person filed for five weeks of benefits in a given week, the Department of Labor typically counted it as five separate claimants, not one. This method of reporting normally is a reliable proxy for the number of unique individuals claiming benefits, but it did not account for states' processing delays and claimants retroactively applying for benefits during the pandemic. While the absolute figures may not be accurate, the trend levels remain helpful for understanding the overall employment outlook.

This SLC Policy Analysis was concluded on March 26, 2021. For additional information regarding the Department of Labor data, please contact Roger Moore at rmoore@csg.org.

Introduction

As the nation continues to confront the public health challenges posed by the COVID-19 pandemic, the economic fallout has been unlike anything experienced since the Great Depression. Mandated statewide closures and stay-at-home orders – implemented in the middle of March 2020 and continuing through most of the following month to mitigate the spread of the novel coronavirus – had a sudden and significant impact on states' economies. Businesses were required to curtail their operations and, in many cases, shutdown completely, leading to widespread layoffs in every state. Meanwhile, consumer spending dropped precipitously, causing additional hardships for companies that could not sustain prolonged periods without stable sources of revenue. The nation's GDP dropped 31.4 percent during the second quarter of 2020, the worst quarterly plunge ever, due to the virus-induced restrictions and shutdowns. The national economic outlook improved in the following months, with third-quarter growth accelerating 33.4 percent, according to the U.S. Commerce Department, followed by a more modest 4.0 percent increase during the fourth quarter.

Although the number of confirmed COVID-19 cases dropped significantly and the administration of vaccines accelerated during the first quarter of 2021, the employment picture remains fragile. It is unclear how quickly the economy will fully recover, as millions of people continue to qualify for and receive unemployment insurance. On March 5, 2021, the U.S. Department of Labor announced that the national unemployment rate in February stood at 6.2 percent, slightly below the 6.3 percent reported in January, with a gain in nonfarm payrolls of 379,000. Although the unemployment rate is much improved from the peak of 14.8 percent recorded in April 2020, it remains almost twice its pre-pandemic level. Of the 22 million jobs lost since the onset of the pandemic, more than 13 million were regained by March 2021.

As many states continue to pursue a balanced and cautious reopening approach to control further spread of the virus during the vaccination campaign, the number of people applying for and receiving unemployment insurance remains high. This SLC Policy Analysis examines the economic impact of the COVID-19 pandemic by highlighting unemployment insurance claims filed between the beginning of March 2020 and end of March 2021. This analysis includes data related to:

  1. Initial Claims Filed: the number of new claims filed by unemployed individuals following separation from an employer;
  2. Insured Unemployment: the number of people continuing to receive unemployment insurance after filing an initial claim; and
  3. Insured Unemployment Rate: the number of people, as a percentage of a state's workforce, continuing to receive unemployment insurance after filing an initial claim.

The data demonstrate the relatively strong employment figures prior to the restrictions and shutdowns that were enacted beginning in mid-March 2020, as well as the sudden spike in unemployment that followed. However, it primarily is intended to track how quickly states' economies are recovering by highlighting the trajectory of employment and to what extent the workforce is returning to pre-pandemic levels. An important caveat to note is that employment figures prior to the passage of the CARES Act at the end of March 2020 do not include independent contractors and other self-employed workers who historically have not qualified for unemployment insurance. As a result, data following the enactment of the CARES Act and subsequent pieces of federal legislation include previously ineligible unemployed individuals who now qualify for benefits.


Initial Claims

The number of initial unemployment claims, or the number of people filing first-time claims for unemployment insurance, spiked in the SLC region during the week ending April 4, 2020, when first-time claims reached nearly 2,000,000. By comparison, the number of initial claims filed across the region during the week ending March 7, 2020, was 47,414 and 55,223 the following week. Nine of the 15 SLC states experienced peaks at the beginning of April 2020, while six – Florida, Missouri, North Carolina, Oklahoma, South Carolina, and West Virginia – reached their peaks at various points between the end of March 2020 and the beginning of May 2020 (see Figure 1).

Initial claims filed at the end of March 2021 were higher in every SLC state compared to the number filed at the beginning of March 2020. Although the trajectories generally trended downward beginning in the second quarter of 2020, progress stalled across the region in September 2020, with consistent levels of unemployment through the end of March 2021. In fact, the number of claims filed in all 15 states on March 20, 2021, was very similar to the number of claims filed six months earlier. At this time, it is difficult to predict when states will fully recover, as the trajectory of the virus, the rollout of vaccines and consistently high unemployment all will impact the job market in the months ahead.

Figure 1: Initial unemployment claims in SLC member states (March 7, 2020 – March 20, 2021)

(Data for individual states can be toggled by clicking on them in the legend)


Insured Unemployment

Insured unemployment, or the number of people continuing to receive unemployment benefits after initially filing, continues to be a critical piece of data for states. Insured unemployment demonstrates how many people continue to receive benefits and, hence, have not returned to work, either with their previous employer or a new employer.

At the beginning of March 2020, insured unemployment for the entire SLC region was at 382,868, before increasing significantly during the week ending March 28. The number of people receiving benefits peaked during the week of May 9 at nearly 7.5 million and then declined to approximately 5.6 million the following week. Following several months of consistent declines, insured unemployment remained steady across the region from the end of 2020 through the middle of March 2021, with the number of claims stabilizing around one million. By contrast, during the preceding five months, the number of insured unemployment claims declined approximately 75 percent (see Figure 2).

Although every SLC state reached a peak for insured unemployment, the number of people continuing to receive benefits remains high. In ten SLC states, year-over-year increases in March 2021 were greater than 100 percent; in the remaining five states, the increases were between 5 percent and 87 percent. These figures underscore the severe impact the pandemic continues to have on states' workforces in 2021. Despite overall positive trends, the employment picture remains much worse than it was in early 2020. A full economic recovery cannot be achieved if the number of people continuing to receive unemployment benefits remains elevated.

Figure 2: Insured unemployment in SLC member states (March 7, 2020 – March 13, 2021)

(Data for individual states can be toggled by clicking on them in the legend)


Insured Unemployment Rate

Reflecting the insured unemployment data in Figure 2, the insured unemployment rate remains exceedingly high, although it is improving. During the week ending March 6, 2021, the insured unemployment rate ranged from a low of 0.9 percent in Alabama to a high of 3.3 percent in Georgia. For the entire SLC region, the average state insured unemployment rate was 2.1 percent, compared to 2.6 percent at the beginning of the year (see Figure 3). Through the beginning of March 2021, the regional insured unemployment rate slowly declined every week since peaking on May 9, with the exception of a few weekly increases, most recently between February 13 and February 20.

Figure 3: Insured unemployment rates in SLC member states (March 7, 2020 – March 6, 2021)

(Data for individual states can be toggled by clicking on them in the legend)